1) Shareholders if Flanney Company have voted in favour of buyout offer from Stultz Corporation. Information about each firm is given here:

Price-earnings ratio Flanney 18.2 Stultz 30 Shares outstanding Flanney 78,000 Stultz 300,000 Earnings Flanney $130,000 Stultz $910,000 Flannye's shareholders will get one share of Stultz stock for every 3 shares they hold in Flanney.

i) What will the ESP of Stultz be after the merger?

ii) What will the PE ratio be if the NPV of the acquisition is zero?

iii) What must Stultz feel is the value of the synergy between these two firm?

2) You are analyzing a project and have prepared the following data:

Cash flow in years:
0: -$169,000
1: $46,200
2: $87,300
3. $41,000
4: $39,000

Required payback: 2.5 years
Required AAR: 7.25%
Required return: $8.5%

Compute profitability index? Must you accept project?  Please show all work.