N Corporation is considering the acquisition of A Corporation. A Corporation has earnings before interest and tax of $1.75 million, and asset replacement cost approximately equals depreciation. Efficiencies gained through the merger will reduce As operating costs by $320,000. Cash flows occur at year-end.
Assuming a 20 percent tax rate and a 10 percent required return, what is the value of As capital without a merger?
Assuming a 20 percent tax rate and a 10 percent required return, what is the value of As capital after a merger?