Marketing Concepts Inc. is considering the aquistion of Management Theories Inc. at a cash price of $1.5 million. Management Thories, Inc. has a short term liabilites of $500,000. As a result of aquiring Management Theories, Inc., Marketing Concepts Inc. would aquire the copyrights to a national best-seller which would provide an estimated cash flow of $300,000. The firm has a cost of capital of 20 percent.
1. What is the approximate net present value of this acquistion?
2. How would this amount be used in a purchase for cash? Purchase for stock?