25. Auto Enterprises is an all-equity firm with a market value of $26 million. The company is considering a cash payment of $5.5 million to purchase all of the outstanding shares of Transit Technologies, which is an all-equity firm with a market value of $4 million. Auto Enterprises predicts that the reorganization will cause a permanent increase in its annual after-tax cash flow of $375,000. Using a discount rate of 8%, estimate the post-merger value of Auto Enterprises.

a. $24,500,000 b. $34,687,500 c. $24,875,000 d. $30,000,000 e. $29,187,500