The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate. Year Free cash flow 1 2 -950 -475 3 0 5 4 290 880 a. Estimate the target's maximum acquisition price. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. X Answer is complete but not entirely correct. Maximum acquisition price $ 8,640 x b. Estimate the target's maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. X Answer is complete but not entirely correct. Maximum acquisition price $ 46,921 X
The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate. Year Free cash flow 1 2 -950 -475 3 0 5 4 290 880 a. Estimate the target's maximum acquisition price. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. X Answer is complete but not entirely correct. Maximum acquisition price $ 8,640 x b. Estimate the target's maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. X Answer is complete but not entirely correct. Maximum acquisition price $ 46,921 X
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
ChapterM: Time Value Of Money Module
Section: Chapter Questions
Problem 19P: Asset Purchase Price BWP Inc. is considering the purchase of an asset. BWPs required rate of return...
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