Should milton go ahead with the purchase of the new company

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Reference no: EM131031447

1. Milton Glasses recently paid a dividend of $1.70 per share, is currently expected to grow at a constant rate of 5%, and has a required return of 11%. Milton Glasses has been approached to buy a new company. Milton estimates if it buys the company, its constant growth rate would increase to 6.5%, but the firm would also be riskier, therefore increasing the required return of the company to 12%. Should Milton go ahead with the purchase of the new company?

a.Yes, because the value of the Milton Co. will increase by $3.17 per share.
b. Yes, because the value of the Milton Co. will increase by $2.56 per share.
c. Yes, because the value of the Milton Co. will increase by $4.59 per share.
d. No, because the value of the Milton Co. will decrease by $3.17 per share.

Reference no: EM131031447

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