Assume that all cash flows occur at the end of the year, Blazer must pay $45 million to acquire Laker. What is the NPV of the proposed acquisition? Note that you must first calculate the value to Blazer of Laker s equity.
Blazer Inc. is thinking of acquiring Laker Company. Blazer expects Laker s NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Laker is expected to have NOPAT of $25 million and interest expense of $5 million. Also, in the second year only, Laker will need $10 million of net new investment in operating capital. Laker s marginal tax rate is 40%. After the second year, the free cash flows and the tax shields from Laker to Blazer will both grow at a constant rate of 4%. Blazer has determined that Laker s cost of equity is 17.5%, and Laker currently has no debt outstanding. Assume that all cash flows occur at the end of the year, Blazer must pay $45 million to acquire Laker. What is the NPV of the proposed acquisition? Note that you must first calculate the value to Blazer of Laker s equity.
Top-quality papers guaranteed
100% original papers
We sell only unique pieces of writing completed according to your demands.
We use security encryption to keep your personal data protected.
We can give your money back if something goes wrong with your order.
Enjoy the free features we offer to everyone
Get a free title page formatted according to the specifics of your particular style.
Request us to use APA, MLA, Harvard, Chicago, or any other style for your essay.
Don’t pay extra for a list of references that perfectly fits your academic needs.
24/7 support assistance
Ask us a question anytime you need to—we don’t charge extra for supporting you!
Calculate how much your essay costs
What we are popular for
- English 101
- Business Studies