Question
Analyze a scenario in which your firm(Lowe's, [LOW]) acquires Barnes and Noble, Inc (BKS). HINT: remember that an acquisition of a whole company can be
Analyze a scenario in which your firm(Lowe's, [LOW]) acquires Barnes and Noble, Inc (BKS). HINT: remember that an acquisition of a whole company can be thought of as a capital budgeting "project" and evaluate accordingly. Assume that the acquisition is made for cash, for a 20% premium to the current stock price. Your firm has to retire an outstanding debt, but can also use any excess cash or investments to offset the purchase price. Assume also that the acquisition of BKS is considered an average risk project for your firm. Project the incremental cash flows that the acquisition will provide your firm in perpetuity. Lastly calculate the net present value (NPV) and payback period for the acquisition.
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