Tapley Acquisition Inc

question 186

Multiple Choice

Tapley Acquisition Inc.is considering the purchase of Target Company.The acquisition would require an initial investment of $190,000,but Tapley's after-tax net cash flows would increase by $30,000 per year and remain at this new level forever.Assume the required rate of return is 15 percent.Should Tapley buy Target?

• A) Yes,because the IRR < the required rate of return (r).
• B) Yes,because the NPV = $30,000.
• C) Yes,because the NPV = $10,000.
• D) No,because r > IRR.
• E) No,because NPV < 0.

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