HiHo IncIs Evaluating a Merger with the Following Cash Flows

question 46

Multiple Choice

HiHo Inc.is evaluating a merger with the following cash flows:
• Years 1 to 3 Incremental Cash Flows: $10 million each year
• Value of incremental cash flows after year 3 as of the end of year 3: $30 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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