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Total after tax annual cash flows

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Reference no: EM133305907

KLM Corp is analyzing the possible acquisition of ANN Corp. Both companies believe the acquisition will increase its total after tax annual cash flows by $3,867,985 indefinitely . The current market value of ANN Corp is $675,000 and KLM Corporation is $12,350,000. The appropriate discount rate for the incremental cash flow is 13.5%. KLM Corp is trying to decide whether it should offer 42% of its stock or $12,100,000 in cash to ANN's shareholder.

a.What is the NPV of the stock offer?

b. What is the NPV of the cash offer?

Reference no: EM133305907

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