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)

Public Answer

7KAVRN The First Answerer