HiHo Inc Is Evaluating a Merger with the Following Cash Flows

question 40

Multiple Choice

HiHo Inc. is evaluating a merger with the following cash flows:
-Years 1 and 2 Incremental Cash Flows: $10 million each year
-Year 3 incremental cash flow: $40 million
-Discount rate = 10 percent
What is the most HiHo should pay for this merger?

• A) $38.53 million
• B) $41.09 million
• C) $47.41 million
• D) $51.27 million

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