Aardvark Software Inc

question 22

Multiple Choice

Aardvark Software Inc. can purchase all the stock of Zebra Computer Services for $1,200,000 in cash. Zebra is expected to generate net after-tax cash flows of $100,000 per year for each of the next 12 years. Based solely on the facts provided, Aardvark should

• A) not purchase Zebra Computer Services.
• B) purchase Zebra Computer Services.
• C) purchase Zebra only if Aardvark's cost of capital is between 5% and 10%.
• D) purchase Zebra only if Aardvark's cost of capital is above 10%.

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Definitions:

Service Infrastructure

The foundational physical and organizational structures needed for the operation of a society or enterprise's services system.

Zone of Tolerance

The range within which customers are willing to accept variations in service delivery or product quality.

Quality Gap

Quality Gap is the difference between customer expectations for service quality and their perceptions of the actual service received.

Instrumental Support

Practical or material assistance provided to someone in need, such as financial help or resources.