What is the cost of each alternative

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Question - Cash versus Stock Payment Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flow by $1.15 million indefinitely. The current market value of Teller is $24 million and that of Penn is $67 million. The appropriate discount rate for the incremental cash flows is 11 percent. Penn is trying to decide whether it should offer 32 percent of its stock or $33 million in cash to Teller's shareholders.

Required -

a. What is the cost of each alternative?

b. What is the NPV of each alternative?

c. Which alternative should Penn choose?

Reference no: EM133273596

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