Analyzing possible acquisition of teller company

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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 after-tax annual cash flows by $2.5 million indefinitely. The current market value of Teller is $44 million, and the market value of Penn is $81 million. The appropriate discount rate for the incremental cash flows is 10%. Penn is trying to decide whether it should offer 40% of its stock or $61 million in cash to Teller's shareholders. What is the cost associated with the cash offer?

Reference no: EM132003457

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