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Business, 30.07.2021 02:20 nculberson6

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 $2 million indefinitely. The current market value of Teller is $54 million, and that of Penn is $84 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 $72 million in cash to Teller’s shareholders. a. What is the cost of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i. e. 1,234,567.)
Cash cost$
Equity cost$
b. What is the NPV of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i. e. 1,234,567.)
NPV cash$
NPV stock$
c. Which alternative should Penn choose?
Stock
Cash

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Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn be...
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