Expand its operations in order to increase its profitability

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Reference no: EM131150582

You work as a consultant for Company A that plans to expand its operations in order to increase its profitability. To that end, it is considering to acquire (buyout) Company B. Your primary task is to advise the company (Company A) on the market value of Company B. After examining the financial statements of Company B, you predict that it will earn $10 million in economic profit in each of the next 6 years, after which, it will earn zero economic profit. Also, you believe 8 percent is the appropriate discount rate for valuing the company. What kind of advice would you give to the company that hired you? Show your work.

Reference no: EM131150582

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