I’m studying for my Accounting class and don’t understand how to answer this. Can you help me study?
Company A is considering acquiring Company B for $1,000,000 in cash. Based on market analysis, a targeted cost of capital for Company B is 12%. Company A has estimated that Company B can generate $ 90,000 of free cash flows over the next 12 years. Should Company A acquire Company B? Please defend your answer using Net Present Value analysis.
A website company generates revenues by selling annual subscriptions to its online service for $1,000/year, paid in full upon subscribing. It sells 10 subscriptions on January 1, 2012 and 10 subscriptions on July 1, 2012.
1. What is the company’s revenue for 2012?