-3- QUESTION 5: IQCapital Limited is evaluating four possible targets, which have the following financial data: A B D PV of incremental cash flows (synergy) $25,000,000 $34,000,000 $20,000,000 $55,000,000 Shares of common stock outstanding 1,000,000 4,000,000 2,000,000 3,000,000 Price per share $80 $50 $60 $65 Expected Earnings $10,000,000 $20,000,000 $15,000,000 $21,000,000 IQCapital presently has 5,000,000 shares outstanding, its stock price is $60, and its expected earnings are $30,000,000 without any merger. Assume that the target firms have no debt and each of the target firm can be acquired at a merger premium of 25% a. Calculate the NPV of the four proposed mergers. Are any of the mergers infeasible? b. Assuming acquisition through stock. Determine the post merger EPS for the feasible merger candidates. c. If only one merger can be undertaken, which one is it? Why