Question you are an analyst valuing palm and sun industries, Ask an Expert

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Question: You are an analyst valuing Palm and Sun Industries for a possible acquisition. Compute the Adjusted Present Value.

The buyer wants cash flows evaluated for 20 years and assumes a terminal value a $50 M to be discounted at 15%. Ignore taxes.

Annual cash flow from continuing operations $ 46 M. Discount at 15%.

Annual cash flow from product line expansion $ 18 M. Discount at 18%.

Annual cash flow from tax savings $ 6 M. The interest rate on debt is 6% and the tax rate is 40%. You do not need to calculate a terminal value for tax savings.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92771716

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