Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

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?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M939992

Have any Question? 


Related Questions in Basic Finance

Suppose the call price is 1420 and the put price is 930 for

Suppose the call price is $14.20 and the put price is $9.30 for stock options where the exercise price is $100, the risk-free interest rate is 5 percent (continuously compounded), and the time to expiration is 1 year. Ex ...

What is the weekly risk free rate with continuous

What is the weekly risk free rate with continuous compounding (You do not need to calculate the number exactly...a close approximation will be sufficient). Risk Free Rate = 1.79% nominal rate with one compounding period ...

You have to make a balloon payment on your house five years

You have to make a balloon payment on your house five years from now of $15,000. If money can earn an average of 6 percent a year for the five-year period, what factor will you use to determine what to deposit now?

1 why is specialization so critical to distribution

1. Why is specialization so critical to distribution efficiency? 2. Describe how the process of assortment overcomes the problems created by specialization. 3. Given the principle of minimum transactions, explain why it ...

The yield on zero-coupon bonds are as followsus yen 1

The yield on zero-coupon bonds are as follows: U.S.$ % Yen % 1 year    3.00       5.00 2 years   3.50       6.00 A young investment banker considers issuing a bond for ¥100 million. The interest or coupon is paid on year ...

Question 1 diane carter is interested in buying a five-year

Question 1: Diane Carter is interested in buying a five-year zero coupon bond with a face value is $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments ...

Which financial variable must be multiplied by the return

Which financial variable must be multiplied by the return on assets ratio in order to calculate the return on stockholders' equity ratio? Which financial ratio assesses management performance by measuring the profitabili ...

Suppose your company imports computer motherboards from

Suppose your company imports computer motherboards from Singapore. The exchange rate is given in Figure 21.1. You have just placed an order for 30,000 motherboards at a cost to you of 233.5 Singapore dollars each. You wi ...

How would a relatively high home inflation rate affect the

How would a relatively high home inflation rate affect the home country's current account, all other thing being equal? How would you expect a weakening home currency to affect the home country's current account, all oth ...

Govt exam review1be prepared to give two examples of

GOVT Exam Review 1. Be prepared to give two examples of Internal Validity problems AND two examples of External Validity problems that can cause inaccurate or biased results in public opinion polls. 2. Be able to explain ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro