Question
6) KLM Corp., is analyzing the possible acquisition of ANN Corp. Both companies believe the acquisition will increase its total after-tax annual cash flows by
6) KLM Corp., is analyzing the possible acquisition of ANN Corp. Both companies believe the acquisition will increase its total after-tax annual cash flows by $9,867,985 indefinitely. The current market value of ANN Corp is $9,450,000 and that of KLM Corporation is $16,250,000. The appropriate discount rate for the incremental cash flows is 13.5%. KLM Corp is trying to decide whether it should offer 52% of its stock or $15,400,000 in cash to ANNs shareholders.
a. What is the NPV of the stock offer?
b. What is the NPV of the cash offer?
Please add the excel sheet.
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