Posted: September 22nd, 2016

XYZ, Inc. has an offer to buy ABC & Sons. XYZ thinks ABC can produce cash flows of $5k, $9k, & $15k over the next three years (respectively)

XYZ, Inc. has an offer to buy ABC & Sons. XYZ thinks ABC can produce cash flows of $5k, $9k, & $15k over the next three years (respectively). After that, XYZ thinks ABC will be worthless. Using a 14% rate of return, XYZ must make it’s purchase decision now. What should XYZ pay today to buy ABC?

Please use Excel (preferably with four columns) to solve.