Purchase Solution

The present value of the cash flows

Not what you're looking for?

Ask Custom Question

Alpha Corporation is considering buying Beta Corporation for $2,400,000 cash. Beta Corporation has a $600,000 tax loss carryforward that could be used immediately by Alpha Corporation. Alpha Corporation pays tax at the rate of 35%. Beta Corporation will provide $300,000 per year in cash flow (in after tax income plus depreciation) for the next 20 years. If Alpha Corporation has a cost of capital of 11%, should Alpha Corporation go forward with the acquisition? (Show your work/calculations/formulas)
Answer

Purchase this Solution
Solution Summary

The present value of the cash flows is assessed.

Solution Preview

Dear Student,

Thank you for using BM.
Below are my answers.

ANSWERS

The present value of the cash flows from Beta ...

Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Basics of corporate finance

These questions will test you on your knowledge of finance.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

View More Free Quizzes
Related BrainMass Solutions

  • Present Value of Preferred Stock

    What are the cash flows associated with calculating the present value of preferred stock? What are the cash flows associated with calculating the present value of common stock?

  • Pro Forma Statement

    87480 Pro forma statement When speaking of the present value of future cash flows, is it referring to values found on a pro forma statement? No. In pro-forma statements we have the nominal value of the cash flows.

  • Crittenden Company

    can find present value for annual cash flows for 10 years at the cost of capital of 10% by using present value of annuity formula.

  • Finance Terms and Discounted Cash Flow Analysis

    The present value of investments expected future cash flows. G. The amount of money today that is considered equivalent to the cash flows expected to take place in the future. H.

  • Calculating present value of a stream of cash flows

    347243 Calculating present value of a stream of cash flows What would be the present value of receiving $100, $200, $300, at the end of 1, 2, 3 years respectively at 8% annual compound interest. Do not use MS Excel or present value tables.

  • Cash flows in preferred and common stock

    170932 What are the cash flows associated with calculating the present value of preferred stock? What are the cash flows associated with calculating the present value of preferred stock?

  • Corporate Valuation Model

    (Refer Corporate finance by Brealy and Myers) 9842220 PRESENT VALUE OF CORPORATE 11086397 Present value of all the free cash flows Intrinsic value of corporate= Present value of corporate - Debt 9086397 Intrinsic value per share= Intrinsic

  • Calculating Expected Cash Flows, NPV, and Present Value

    Anna, 108710 Expected Cash Flows, NPV, and Present Value Expected cash flows These are computed from the forecasted statement of income created for years 1 to 5.

  • Time Value of Money

    205147 Present Value of Cash flow, Future Value of Cash flow You are considering a project with the following cash flows: Year Cash flow 1 5600 2 9000 3 2000 5.

  • Use of Cash Flow Information and Present Value

    The estimation of the present value is based on estimates of the life of the cash flows and discounting rate, this differs from company to company and reduces the comparability.

View More Related Solutions