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Rush Inc. is buying Andy Inc. After purchasing Andy Inc., Rush Inc. will be able to...

Rush Inc. is buying Andy Inc. After purchasing Andy Inc., Rush Inc. will be able to invest in a project with an upfront cost of $18 million, which pays out $9 million after taxes per year for 46 years. Both Rush Inc. and Andy Inc. are all equity, Rush Inc. unlevered cost of equity will be 0.21 after the merger. If Rush Inc. offer Andy Inc. 's shareholders a $5 million premium to get them to accept the deal, what is the NPV of this merger?

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E23 A E Present value 19 20 21 Upfront cost 22 Premium 23 Annual cash flows 24 X f =+D23*C23 B C D Year Cash flows PV Factor

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