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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 aftertax annual cash flow by $3 million indefinitely. The current market value of Teller is $51 million, and that of Penn is $89 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 45 percent of its stock or $77 million in cash to Teller’s shareholders.
A. What is the cost of each alternative
B. What is the NPV of each alternative
Find the simple rate of interest on the following transactions using the dollar weighted method $312.50 initial deposit on March 15.
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