Aardvark Software, Inc

Question 32
Multiple Choice

Aardvark Software, Inc. can purchase all the stock of Zebra Computer Services for $1,000,000 in cash. Zebra is expected to generate net after-tax cash flows of $100,000 per year for each of the next 10 years. Aardvark should: A) not purchase Zebra Computer Services. B) purchase Zebra Computer Services. C) purchase Zebra only if Aardvark's cost of capital is between 5% and 10%. D) purchase Zebra only if Aardvark's cost of capital is above 10%.