BG Corporation is considering a bid to take over SM Limited

BG Corporation is considering a bid to take over SM Limited. Should the take over occur, BG Corporation would benefit from SM Limited’s before-tax operating cashflows of:i) $500,000 per year for the first three years,ii) $700,000 per year from the fourth year into perpetuity, andiii) $225,000 per year of synergistic savings before taxes in perpetuity startingfrom the first year.Assume that the cash flows occur at the end of each year, the tax rate is 40% for bothcompanies, and BG Corporation’s after-tax required rate of return is 13%. What is themaximum amount that BG Corporation should be willing to pay to take over SMCorporation (rounded to the nearest thousand dollars)?