Valuation of a Merger Tim's Fix It Shop,Inc.,is asking a price of $50 million to be purchased by Taylor's Tire Hut Corp.The two firms currently have cumulative total cash flows of $4 million which are growing at 2 percent annually.Managers estimate that because of synergies the merged firm's cash flows will increase by an additional 5 percent for the first four years following the merger.After the first four years cash flows will grow at a rate of 3 percent.The WACC for the merged firms is 12 percent.Calculate the NPV of the merger.Should Taylor's Tire Hut Corporation agree to acquire Tim's Fix It Shop,Inc.,for the asking price of $50 million?

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The Answer of Valuation of a Merger Tim's Fix It Shop,Inc.,is asking a price of $50 million to be purchased by Taylor's Tire Hut Corp.The two firms currently have cumulative total cash flows of $4 million which are growing at 2 percent annually.Managers estimate that because of synergies the merged firm's cash flows will increase by an additional 5 percent for the first four years following the merger.After the first four years cash flows will grow at a rate of 3 percent.The WACC for the merged firms is 12 percent.Calculate the NPV of the merger.Should Taylor's Tire Hut Corporation agree to acquire Tim's Fix It Shop,Inc.,for the asking price of $50 million?