ABC Is Considering Acquiring XYZ and Has Compiled This Information

question 72

Multiple Choice

ABC is considering acquiring XYZ and has compiled this information on XYZ: The applicable tax rate is 21 percent and the terminal value of XYZ as of Year 3 is $2.5 million.What is the NPV of this acquisition if the discount rate is 7.1 percent and the acquisition cost is $2.25 million?

• A)$538,316
• B)$509,482
• C)$499,003
• D)$506,048
• E)$496,399

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Definitions:

Level Of Significance

A threshold in hypothesis testing that measures the probability of rejecting a null hypothesis when it is actually true, commonly denoted by alpha (α).

Hourly Wages

The amount of money paid to an employee for each hour of work.

Interval Estimate

An estimate of a population parameter that specifies a range within which the parameter is expected to lie, often associated with a confidence level.

Test Statistic

A measure calculated from sample data to make decisions about a population parameter in hypothesis testing.