Atlantic Corporation is considering the purchase of the linerboard mill and corrugated box plants of Royal Paper for a total price of $260 million. The estimated incremental cash flows that would...


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Calculate the NPV, IRR, and payback period for the acquisition and indicate what you think Atlantic should do


Atlantic Corporation is considering the purchase of the linerboard mill and corrugated box plants of<br>Royal Paper for a total price of $260 million. The estimated incremental cash flows that would result<br>if Atlantic acquired the facilities are presented below. Atlantic's marginal tax rate is 36% and their<br>after-tax cost of capital is 13%.<br>(in $ Millions)<br>1984<br>1985<br>1986<br>1987<br>1988<br>1989<br>1990<br>1991<br>1992<br>1993<br>EBIAT<br>20.1<br>28.4<br>41.6<br>36.9<br>38.7<br>43.4<br>50.3<br>58.2<br>62.5<br>67.0<br>25.3<br>Depreciation<br>Operating Cashflows<br>20.9<br>41.0<br>28.3<br>35<br>39.3<br>41.3<br>39.3<br>34.3<br>27.1<br>26.3<br>56.7<br>76.6<br>76.2<br>80.0<br>82.7<br>84.6<br>85.3<br>88.8<br>92.3<br>(19.2) (30.5) (41.7)<br>(9.0) (16.0) (10.0)<br>CAPEX<br>(10.2) (10.2) (8.2)<br>(5.0)<br>(6.2) (6.2)<br>(5.0) (4.0)<br>(4.2)<br>(6.0)<br>(4.2)<br>(5.0)<br>NWC<br>(4.0) (5.0)<br>Terminal Value<br>0.0<br>0.0<br>0.0<br>24.9<br>0.0<br>0.0<br>0.0<br>0.0<br>0.0<br>0.0 381.5<br>78.6 464.6<br>Free Cash Flows<br>12.8<br>10.2<br>61.0<br>65.8<br>69.5<br>73.4<br>75.1<br>

Extracted text: Atlantic Corporation is considering the purchase of the linerboard mill and corrugated box plants of Royal Paper for a total price of $260 million. The estimated incremental cash flows that would result if Atlantic acquired the facilities are presented below. Atlantic's marginal tax rate is 36% and their after-tax cost of capital is 13%. (in $ Millions) 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 EBIAT 20.1 28.4 41.6 36.9 38.7 43.4 50.3 58.2 62.5 67.0 25.3 Depreciation Operating Cashflows 20.9 41.0 28.3 35 39.3 41.3 39.3 34.3 27.1 26.3 56.7 76.6 76.2 80.0 82.7 84.6 85.3 88.8 92.3 (19.2) (30.5) (41.7) (9.0) (16.0) (10.0) CAPEX (10.2) (10.2) (8.2) (5.0) (6.2) (6.2) (5.0) (4.0) (4.2) (6.0) (4.2) (5.0) NWC (4.0) (5.0) Terminal Value 0.0 0.0 0.0 24.9 0.0 0.0 0.0 0.0 0.0 0.0 381.5 78.6 464.6 Free Cash Flows 12.8 10.2 61.0 65.8 69.5 73.4 75.1

Jun 05, 2022
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