You are a director of a capital acquisition for Crode. One of the projects you are considering is the acquisition of Geek, a private software company...

R 7,500,000.00

Of the R20 million in cash needed for the purchase, R5 million is available from retained earnings, with a required return of 12 per cent, and the remaining R15 million will come from a new debt issue yielding 8 percent. Crode's tax rate is 40 pe rcent. Should you recommend acquisition of Geek?