Finance Homework Question

timer Asked: Jun 29th, 2015

Question description

Company B wants to buy Company A. 

 Assume that company A has pre-tax cash flows of $5 Billion per year, with no growth expected in the future. In addition, the firm is subject to a 35% corporate tax rate and Company B has determined that an appropriate discount rate for the firm is 18%. 

What is the maximum amount that Company B should buy Company A for?

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