What would plant’s gain be from this acquisition

Assignment Help Finance Basics
Reference no: EM131424178

Calculating NPV Plant, Inc., is considering making an offer to purchase Palmer Corp. Plant's vice president of finance has collected the following information:

1271_535fdd23-c0fa-4f22-b37c-fa2223b98d0c.png

Plant also knows that securities analysts expect the earnings and dividends of Palmer to grow at a constant rate of 5 percent each year. Plant management believes that the acquisition of Palmer will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year.

a. What is the value of Palmer to Plant?

b. What would Plant's gain be from this acquisition?

c. If Plant were to offer $17 in cash for each share of Palmer, what would the NPV of the acquisition be?

d. What's the most Plant should be willing to pay in cash per share for the stock of Palmer?

e. If Plant were to offer 250,000 of its shares in exchange for the outstanding stock of Palmer, what would the NPV be?

f. Should the acquisition be attempted, and, if so, should it be as in (c) or as in (e)?

g. Plant's outside financial consultants think that the 7 percent growth rate is too optimistic and a 6 percent rate is more realistic. How does this change your previous answers?

Reference no: EM131424178

Questions Cloud

What is comp-xm : Comp-XM is familiar, yet different from your experience in Capstone or Foundation. You are the CEO. You will be making decisions on your own; you will not be a member of a team. Like Capstone, Comp-XM uses a spreadsheet and a web interface.There a..
Elements of success or failure : Describe the strategies that theseoligopolistic companies used to fight the toothpaste war. What were the elements of success or failure?
What is the probability that the case is not from region 5 : What is the probability that the case is from Region 1, 2, 3, or 4?- What is the probability that the case is from Region 9 or 10?
Legislation affected countries and the results : Discuss global examples of how minimum wage legislation affected countries and the results.
What would plant’s gain be from this acquisition : If Plant were to offer $17 in cash for each share of Palmer, what would the NPV of the acquisition be?
Explain the role of staffing to support an organizations : Identify three (3) job requirements that could apply to your chosen scenario. Determine two (2) ways these requirements could impact staffing at your organization. Next, suggest one (1) strategy that you could utilize to ensure that all applicants..
What is the present value : What is the Present value of $500 that you may inherit 2 years from now? What information do you need to compute this value?
Purpose of systems design : The purpose of systems design is to answer the question "How will the information system solve a problem? Write a 1-2 page paper which introduces system design and different methods of accomplishing your goal. Explain the hardware, software and us..
How many different two topping pizzas are possible : How many different two-topping pizzas are possible?- Suppose that all of the pizzas are equally likely. What is the probability that the next pizza ordered has at least one meat topping?

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Balancing these financials

I need help balancing these financials and please highlight in blue all the changes you make. let me know if you have questions

  How would you measure the different forms of debt?

How would you measure the different forms of debt?

  What is the after-tax preferred yield for selten

Buggy's tax rate is 0% due to continuing heavy tax losses, and Selten's tax rate is 34%. What is the after-tax preferred yield for Selten?

  Take place to transfer of capital

How many ways take place to Transfer of capital? Can you please Elaborate on this and the difference between each way or method.

  Large industrial construction organization

Kathy is a project manager for a large industrial construction organization. Our case study as indicated that she is very organized and a highly self-motivated individual. What type of traits what an individual possesses who was highly motivated?

  How should an insurance company incorporate insurance

how should an insurance company incorporate insurance contract acquisition costs in the fair value

  What are the advantages to a us firm of financing its

what are the advantages to a u.s. firm of financing its foreign investments with funds raised

  Are her husband comments correct or incorrect

Her husband comments, "It doesn't matter whether you keep all of the ABC stock or replace it with $100,000 of the XYZ stock." Are her husband's comments correct or incorrect? Justify your response.

  What do you think is the relationship between a firms opera

What do you think is the relationship between a firm's operating leverage and its financial leverage? Do you think the two measures are positively correlated, negatively correlated, or unrelated? Explain your answer.

  Size of the loan taken out by the couple

A couple has just purchased a home for $447,500.00. They will pay 20% down in cash, and finance the remaining balance. The mortgage broker has gotten them a mortgage rate of 5.52% APR with monthly compounding. The mortgage has a term of 30 years.W..

  Portfolio theory as described by markowitz is most

portfolio theory as described by markowitz is most concerned witha. the elimination of systematic risk.b. the effect of

  Shares of preferred stock outstanding

The company has been losing mone and has not paid preferred dividends for the last five years. There are 350,000 shares of preferred stock outstanding and $650,000 shares of common stock.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd