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Ben's Bargain Co . is looking at acquiring Sal's Econo Store in an all cash deal. Ben's Bargains has 2 4 2 , 5 0

Ben's Bargain Co. is looking at acquiring Sal's Econo Store in an all cash deal. Ben's Bargains has 242,500 shares outstanding at $50 per share and Sal's, a private company, has expected annual cash flows of $340,000 per year (forever). Both firms have an 8% cost of capital. With Ben's marketing & sales expertise, they feel would be able to increase Sal's annual cash flows by 4% annually if the firms combine. What is the maximum cash price Ben's Bargain Co. should offer?
$4,250,000
$8,187,500
$4,420,000
$8,500,000
$12,125,000
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