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Northern (A) is considering merging with Wisconsin Software (B). Neither firm has debt Northern forecasts that total combined annual after-tax cash flows would increase
Northern (A) is considering merging with Wisconsin Software (B). Neither firm has debt Northern forecasts that total combined annual after-tax cash flows would increase by $2 million indefinitely. Northern's current market value = $125 million Wisconsin's current market value = $70 million (VA = $125M.) (VB = $70M.) The appropriate discount rate for the incremental cash flows is 8% Northern has 1 million shares outstanding f) What is the postmerger firm value if cash is offered? g) What is the postmerger firm value if STOCK is offered? h) What is the merged firm's stock price if cash is offered? i) What is the merged firm's stock price if STOCK is offered?
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