What is the npv of the stock offer

Reference no: EM133291097

Question: Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition will increase its total aftertax annual cash flow by $854042.59 indefinitely. The current market value of Teller is $23443240 and that of Penn is $71520472. The appropriate discount rate for the incremental cash flow is 12.82%. Penn is trying to decide whether it should offer 33% of its stock or $39155850 in cash to Teller's shareholders.

What is the NPV of the stock offer?

HINT: Subtract the equity cost (as computed in the previous problem) from the value of the combined firm.

Reference no: EM133291097

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