Valuation of a Merger Windows N Such,Inc

question 76

Multiple Choice

Valuation of a Merger Windows N Such,Inc.,is asking a price of $195 million to be purchased by Curtain Rods Corp.The two firms currently have cumulative total cash flows of $15 million which are growing at 1 percent annually.Managers estimate that because of synergies the merged firm's cash flows will increase by an additional 3 percent for the first four years following the merger.After the first four years cash flows will grow at a rate of 2 percent.The WACC for the merged firms is 10 percent.Calculate the NPV of the merger.Should Curtain Rods Corporation agree to acquire Windows N Such,Inc.,for the asking price of $195 million?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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