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Beauty Seasons, a national beauty salon chain, is considering purchasing a smaller chain, Tomorrow's Styles. Beauty Seasons analysts project that the merger will result in incremental free cash flows with a present value of $72,520,000 and they have determined that the appropriate discount rate for valuing Tomorrow's Styles is 16%.

Tomorrow's Styles has 4 million shares outstanding and has no debt. Tomorrow's Styles current stock price is $16.25.

1) What is the maximum price per share that Beauty Seasons should offer to acquire Tomorrow's Styles?

A) $16.25

B) $16.97

C) $17.42

D) $18.13

E) $19.00

Show your calculations.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M92573733
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