What is cost of each alternative

Assignment Help Financial Management

Reference no: EM131552550

Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flow by $2 million indefinitely. The current market value of Teller is $54 million, and that of Penn is $84 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 45 percent of its stock or $72 million in cash to Teller’s shareholders.

a. What is the cost of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i.e. 1,234,567.)

Cash cost $

Equity cost $

b. What is the NPV of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i.e. 1,234,567.)

NPV cash $

NPV stock $

Reference no: EM131552550

Questions Cloud

What do you think of thrasymachus definition of justice : What do you think of Thrasymachus' definition of Justice? How well do you think Socrates refuted it?

Find the kinetic energy of the ions : At the left, labeled A, is a source of negatively charged chlorine ions Cl- (i.e., each ion carries a charge -e). A 1-MV potential difference is applied.

Smaller acquiring company to have large cash reserves : Would it be unusual for a smaller acquiring company to have large cash reserves? Why or why not?

Identify the leadership behaviors : Select the basic values that will provide the foundation of your model and identify the leadership behaviors that will result from those values.

What is cost of each alternative : Penn Corp. is analyzing the possible acquisition of Teller Company. What is the cost of each alternative?

Bound is available for purchase that has face value : A bound is available for purchase that has face value of $ 100000 an 8.5% coupon payable semiannually and 20 years of its original 25 years left to maturity.

Describe the stages of child development for children : For this post you will start by providing a summary describing the stages of child development for children that are entering Kindergarten.

Describe qualitatively the motion of the particle : If the plates have a separation of 20cm, calculate the magnitude and direction of the electric field.

How is an organization like an iceberg : How is an organization like an iceberg? Use the iceberg metaphor to describe the field of organizational behavior.

User Account

All Pages