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On October 4, 1996, Tenet Healthcare Corporation, the second-largest hospital company in the United States at that time, announced that it would buy Ornda Healthcorp.
On October 4, 1996, Tenet Healthcare Corporation, the second-largest hospital company in the United States at that time, announced that it would buy Ornda Healthcorp. (a) If Tenet Healthcare Corporation assumed that Ornda's annual revenue of $0.273 billion would increase by 10% per year and that the revenues could be continuously reinvested at an annual return of 15%, what would Tenet Corporation consider to be the 20-year present value of Ornda Healthcorp at the time of the buyout? billion (b) If Ornda Healthcorp's forecast for its financial future was that its $0.273 billion annual revenue would remain constant and that revenues could be continuously reinvested at an annual return of 18%, what would Ornda Healthcorp consider its 20-year present value to be at the time of the buyout? billion (c) Tenet Healthcare Corporation bought Ornda Healthcorp for $1.82 billion in stock. If the sale price was the 20-year present value, did either of the companies have to compromise on what they believed to be the value of Ornda Healthcorp
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