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Blazer Inc. is thinking of acquiring Laker Company. Blazer expects Laker's NOPAT to be $9 million the first year, with no net new investment in...

Blazer Inc. is thinking of acquiring Laker Company.  Blazer expects Laker’s NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense.  For the second year, Laker is expected to have NOPAT of $25 million and interest expense of $5 million.  Also, in the second year only, Laker will need $10 million of net new investment in operating capital.  Laker's marginal tax rate is 40%.  After the second year, the free cash flows and the tax shields from Laker to Blazer will both grow at a constant rate of 4%.  Blazer has determined that Laker’s cost of equity is 17.5%, and Laker currently has no debt outstanding.  Assume that all cash flows occur at the end of the year, Blazer must pay $45 million to acquire Laker.  What it the NPV of the proposed acquisition?  Note that you must first calculate the value to Blazer of Laker’s equity.
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