Penn corp is analyzing the possible acquisition of teller, Ask an Expert

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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 $3 million indefinitely. The current market value of Teller is $51 million, and that of Penn is $89 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 $77 million in cash to Teller’s shareholders.

A. What is the cost of each alternative

B. What is the NPV of each alternative

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92774266

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