What is the npv of the cash offer

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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 $2867985 indefinitely. The current market value of ANN Corp is $9,000,000 and that of KLM Corporation is $14,950,000. The appropriate discount rate for the incremental cash flows is 10.5%. KLM Corp is trying to decide whether it should offer 48% of its stock or $14,300,000 in cash to ANN's shareholders.

Problem a. What is the NPV of the stock offer?

Problem b. What is the NPV of the cash offer?

Reference no: EM132889015

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