during and economic downturn we can acquire


During and economic downturn, we can acquire another company by purchasing its stock for $6 billion. The company is earning $700 million a year, which is available for dividends, and that level of income is expected to continue whether the company remains independent or we acquire it. If we acquire the company, though, we can use a joint sales force to reduce cost and thus increase our income by $300 million a year indefinitely. The acquisition candidate has approximately the same risk as our company, and because our industry is cyclical, our investors require an 8 percent return. Is the investment attractive?

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Financial Econometrics: during and economic downturn we can acquire
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