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%.