BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information:

BQ iReport

Price-earnings ratio 14.4 9.4

Shares outstanding 1,800,000 160,000

Earnings $3,800,000 $640,000

Dividends $880,000 $330,000

BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 4 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 6 percent per year.

a. What is the value of iReport to BQ?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

Value of iReport = 9,441,600

b. What would BQ's gain be from this acquisition?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

Gain = 3,425,600

c. If BQ were to offer $44 in cash for each share of iReport, what would the NPV of the acquisition be?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

NPV = 2,401,600

d. What's the most BQ should be willing to pay in cash per share for the stock of iReport?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

Maximum share price = 59.01

e. If BQ were to offer 290,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

NPV =

BQ's outside financial consultants think that the 6 percent growth rate is too optimistic and a 5 percent rate is more realistic.

f-1 What is the value of iReport to BQ now?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

Value of iReport =

f-2 What would BQ's gain be from this acquisition?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

Gain =

f-3 If BQ were to offer $44 in cash for each share of iReport, what would the NPV of the acquisition be?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

NPV =

f-4 What's the most BQ should be willing to pay in cash per share for the stock of iReport?(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

Maximum share price =

f-5 If BQ were to offer 290,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be?(Negative amount should be indicated by a minus sign.Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)

NPV =