What is the value of palmer to plant? what would be plants, Ask an Expert

Finance

Plant Inc. is considering making an offer to purchase Palmer Corp. Plant's VP has collected the following information:

Plant Palmer

Price-earnings Ratio 14.00 11.0

Shares Outstanding 1,000,000 620,000

Earnings $1,800,000 $580,000

Dividends (total) $600,000 $290,000

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

Assume that Plant has hired you as an Investment Banker to help them with the following problems.

1. What is the value of Palmer to Plant?

2. What would be Plant's gain from this acquisition

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

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M939992

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Timco needs to invest 250 in new assets they use a capital

Timco needs to invest 250 in new assets. They use a capital structure that is 40% debt and 60% equity. Next years net income is expected to be 400. Find the amount for the residual dividend.

Question - if tapley inc borrows 500000 on a 10 add on

Question - If tapley inc borrows 500000 on a 10 add on basis payable over 3 years in 36 equal end of month installments how large would the monthly payments be?

Capital budgeting problem - npv amp taxobunkem

Capital Budgeting Problem - NPV & Tax Obunkem Manufacturing - a producer of Computer & Accessories is considering setting up a new production plant at its location in Pretoria, South Africa at the cost of $32, 400 millio ...

Suppose you are going to receive 14100 per year for six

Suppose you are going to receive $14,100 per year for six years. The appropriate interest rate is 6.9 percent. a. What is the present value of the payments if they are in the form of an ordinary annuity? (Do not round i ...

What do you think happened to bond prices when interest

What do you think happened to bond prices when interest rates went down in the US after the GFC?

Red sun rising just paid a dividend of 237 per share the

Red Sun Rising just paid a dividend of $2.37 per share. The company said that it will increase the dividend by 25 percent and 20 over the next two years, respectively. After that, the company is expected to increase its ...

Based on your review of the financial statements of company

Based on your review of the financial statements of Company A and B, suggest a key insight about the financial health of the companies.

Assignment - your credit reportgood personal credit

Assignment - Your Credit Report Good personal credit standing is integral to financial success. As an individual, you are judged by your personal credit. Your credit rating is not only used to determine your ability to b ...

What is interest rate parity the international fisher

What is Interest Rate Parity, the International Fisher Effect, and international arbitrage opportunities with interest and currency exchange rates.

Is an institutional client different from an institutional

Is an institutional client different from an institutional investor? If so could you please please give an example of each just so I understand?

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert