BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information: BQ iReport 9.3 14.6 Price-earnings ratio Shares outstanding Earnings Dividends 1,200,000 180,000 $3,900,000 $645,000 $ 890,000 $340,000 BQ also knows that securities analysts expect the earnings and dividends of Report to grow at a constant rate of 5 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 7 percent per year. a. What is the value of Report to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 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.) c. If BQ were to offer $40 in cash for each share of Report, 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.) 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.) e. If BQ were to offer 180,000 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.) a. Value of Report Gain b. C. NPV d. Maximum share price e. NPV BQ's outside financial consultants think that the 7 percent growth rate is too optimistic and a 6 percent rate is more realistic. f-1. What is the value of Report to BQ now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 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.) f-3. If BQ were to offer $40 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.) 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.) f-5. If BQ were to offer 180,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) f-1. f-2. f-3. f-4. f-5. Value of iReport Gain NPV Maximum share price NPV
