Dublin Medical (DM), a large established corporatiin with bo growth in uts real earnings, is considering aquiring 100% of the shares of Arlington Corporation, a young firm with high growth rate of earnings. The acquisitions group at thr DN has produced the following table of relevant data:

DMs analysts estimate that investors currently expect growth of about 6% per year in Arlingtons earnings and dividends. Thry assume that with the improvements in management that DM could bring to Arlington, its growth rate would be 10% per year beginning one year from now with bo additional investment outlays beyond those already expected. What is the expected gain from the aquisition? What is the net present value NPV of the aquisition to DM shareholders if it costs an average of $30 per share to aquire all of the outstanding shares? Would it matter to DMs shareholders whether the share of Arlington stock are aquired by paying cash or DM stock?

Dublin Medical Arlington Earnings per share $3.00 $2.00 Dividend per share $3.00 $.80 Number of shares 200 million 10 million Stock price $30 $20