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 cash flow analysis and 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%.

Question

Quizplus · Accepted Answer

The Answer of 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 cash flow analysis and 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%.