91Ó°ÊÓ

To calculate the total cash inflow first of all PV factor table is created:

Present Value of year 1-5:

$\begin{array}{rcl}\mathbf{Total}\mathbf{}\mathbf{Cash}\mathbf{}\mathbf{Inflow}& \mathbf{=}& \mathbf{Cash}\mathbf{}\mathbf{Inflow}\mathbf{+}\mathbf{Synergistics}\mathbf{}\mathbf{Benefits}\\ & \mathbf{=}& \mathbf{\$}\mathbf{150}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{20}\mathbf{,}\mathbf{000}\\ & \mathbf{=}& \mathbf{\$}\mathbf{170}\mathbf{,}\mathbf{000}\end{array}$

$\begin{array}{rcl}\mathbf{Present}\mathbf{}\mathbf{Value}& \mathbf{=}& \mathbf{Total}\mathbf{}\mathbf{Cash}\mathbf{}\mathbf{Inflows}\mathbf{×}\mathbf{PV}\mathbf{}\mathbf{Factor}\\ & \mathbf{=}& \mathbf{\$}\mathbf{170}\mathbf{,}\mathbf{000}\mathbf{×}\mathbf{3}\mathbf{.}\mathbf{6959}\\ & \mathbf{=}& \mathbf{\$}\mathbf{628}\mathbf{,}\mathbf{303}\end{array}$

Present Value of year 6-15:

$\begin{array}{rcl}\mathbf{Total}\mathbf{}\mathbf{Cash}\mathbf{}\mathbf{Inflow}& \mathbf{=}& \mathbf{Cash}\mathbf{}\mathbf{Inflows}\mathbf{+}\mathbf{Synergistics}\mathbf{}\mathbf{Benefits}\\ & \mathbf{=}& \mathbf{\$}\mathbf{170}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{30}\mathbf{,}\mathbf{000}\\ & \mathbf{=}& \mathbf{\$}\mathbf{200}\mathbf{,}\mathbf{000}\end{array}$

$\begin{array}{rcl}\mathbf{Present}\mathbf{}\mathbf{Value}& \mathbf{=}& \mathbf{Total}\mathbf{}\mathbf{Cash}\mathbf{}\mathbf{Inflows}\mathbf{×}\mathbf{PV}\mathbf{}\mathbf{Factor}\\ & \mathbf{=}& \mathbf{\$}\mathbf{200}\mathbf{,}\mathbf{000}\mathbf{×}\mathbf{3}\mathbf{.}\mathbf{4950}\\ & \mathbf{=}& \mathbf{\$}\mathbf{699}\mathbf{,}\mathbf{000}\end{array}$

Present Value of year 16-20:

$\begin{array}{rcl}\mathbf{Total}\mathbf{}\mathbf{Cash}\mathbf{}\mathbf{Inflows}& \mathbf{=}& \mathbf{Cash}\mathbf{}\mathbf{Inflows}\mathbf{+}\mathbf{Synergistics}\mathbf{}\mathbf{Benefits}\\ & \mathbf{=}& \mathbf{\$}\mathbf{210}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{000}\\ & \mathbf{=}& \mathbf{\$}\mathbf{260}\mathbf{,}\mathbf{000}\end{array}$

$\begin{array}{rcl}\mathbf{Present}\mathbf{}\mathbf{Value}& \mathbf{=}& \mathbf{Total}\mathbf{}\mathbf{Cash}\mathbf{}\mathbf{Inflows}\mathbf{×}\mathbf{PV}\mathbf{}\mathbf{Factor}\\ & \mathbf{=}& \mathbf{\$}\mathbf{925}\mathbf{,}\mathbf{000}\mathbf{×}\mathbf{0}\mathbf{.}\mathbf{658}\\ & \mathbf{=}& \mathbf{\$}\mathbf{608}\mathbf{,}\mathbf{650}\end{array}$

Net Present Value:

$\begin{array}{rcl}\mathbf{Net}\mathbf{}\mathbf{Present}\mathbf{}\mathbf{Value}& \mathbf{=}& \mathbf{Cash}\mathbf{}\mathbf{Inflows}\mathbf{-}\mathbf{Cash}\mathbf{}\mathbf{Outflows}\\ & \mathbf{=}& \mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{935}\mathbf{,}\mathbf{953}\mathbf{-}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{060}\mathbf{,}\mathbf{000}\\ & \mathbf{=}& \mathbf{\$}\mathbf{875}\mathbf{,}\mathbf{953}\end{array}$

Hence the net present value is $875,953. Hence, the merger should be taken