CASE 3 (30 points) Penn Corporation is analysing the possible acquisition of Teller Company. There are two alternatives for Penn: to use cash or stock as payment. Both firms have no debt. Penn believes the acquisition will increase its total after-tax annual cash flow by 1.3 million indefinitely. The current market value of Teller is 27 million, and that of Penn is 62 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 35 percent of its stock or (37 million in cash to Teller's shareholders. Instructions: What is the cost of each alternative? (5 points) What is the NPV of each alternative? (5 points) Which alternative should Penn choose? (5 points) d. What are some important factors in deciding whether to use stock or cash in an acquisition? (10 points) Explain what defensive tactics the managers of Teller Company could use to resist acquisition. (5 points) b. c