Tang Mining is considering the acquisition of Zang Mining at a cash price of Php 6,000,000 The primary motivation for Tang's purchase of Zang is for a special piece of drilling equipment that it believes will generate after-tax cash flows if Php 2,000,000 per year during the next 5 years. Zang Mining has liabilities of Php 9,000,000 and Tang estimates that it can sell the remaining assets Php 6,500,000. Tang will use a 15 percent cost of capital for evaluating the acquisition. Based on this information, what is the net value of the special drilling equipment? a. Php 1,795,690 B. Php 1,500,000 c Php (1,795,690) d. Php (1,500,000)
Tang Mining is considering the acquisition of Zang Mining at a cash price of Php 6,000,000 The primary motivation for Tang's purchase of Zang is for a special piece of drilling equipment that it believes will generate after-tax cash flows if Php 2,000,000 per year during the next 5 years. Zang Mining has liabilities of Php 9,000,000 and Tang estimates that it can sell the remaining assets Php 6,500,000. Tang will use a 15 percent cost of capital for evaluating the acquisition. Based on this information, what is the net value of the special drilling equipment? a. Php 1,795,690 B. Php 1,500,000 c Php (1,795,690) d. Php (1,500,000)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...
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Tang Mining is considering the acquisition of Zang Mining at a cash price of Php 6,000,000 The primary motivation for Tang's purchase of Zang is for a special piece of drilling equipment that it believes will generate after-tax cash flows if Php 2,000,000 per year during the next 5 years. Zang Mining has liabilities of Php 9,000,000 and Tang estimates that it can sell the remaining assets Php 6,500,000. Tang will use a 15 percent cost of capital for evaluating the acquisition. Based on this information, what is the net value of the special drilling equipment?
a. Php 1,795,690
B. Php 1,500,000
c Php (1,795,690)
d. Php (1,500,000)
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