Company A, a private equity firm, is considering the acquisition of Company B, Inc., a publicly held all-equity firm. Company B currently derives all its sales from the SEGMENT 2 market. Company A expects to create value by expanding Company Bs sales to Segment 1 and improving the efficiency of its SEGMENT 2 operations. Specifically, Company A expects the following opportunities for value creation:

SEGMENT 1

This segment will create revenue of $800 one year after the acquisition, and this revenue is expected to increase at an annual rate of 4% in perpetuity. The pre-tax operating margin (i.e., EBITDA margin) on this increased revenue will be 20%. Pre-tax operating margin = (Revenue Cash costs)/Revenue. Company A estimates that the present value in Year 0 of future capital expenditures will be $1,800. There will be no need for additional working capital. The tax rate for this segment is zero.

SEGMENT 2

Improving efficiency will reduce annual cash costs by $400, starting one year after the acquisition, and the decrease will be perpetual. That is, the difference between post- and pre-acquisition cash costs of SEGMENT 2 operations each year will be $400, and this difference will exist in perpetuity. There will be no changes in capital expenditure or working capital. The tax rate for this segment is 25%. The WACC for both segments is 8%. Company Bs pre-acquisition stock price (before any news of acquisition became public) is $75 and it has 200 shares outstanding. What is Company As breakeven price per share for Company B? Note that at the breakeven price the NPV of the acquisition to Company A is zero.