What is the value of Flash-in-the-Pan to Fly-By-Night

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Reference no: EM132857991

Question - Fly-By-Night Couriers is analyzing the possible acquisition of Flash-In-The-Pan Restaurants. Neither firm has debt. The forecast of Fly-By-Night show that the purchase would increase its annual after-tax cash flow by #370,000 indefinitely. The current market value of Flash-in-the-pan is $9 million. The current market value of fly-By-Night is $23 million. The appropriate discount rate of the incremental cash flows is 8 percent. Fly-By-Night is trying to decide whether it should offer 35 percent of its stock or $13 million in cash to Flash-in-the-Pan.

Required -

a. What is the synergy from the merger?

b. What is the value of Flash-in-the-Pan to Fly-By-Night?

c. What is the cost to Fly-By-Night of each alternative?

d. What is the NPV to Fly-By-Night of each alternative?

Reference no: EM132857991

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