Patterson Inc. is analyzing the possible acquisition of Bluntly Media Ltd. Neither firm has debt. The forecasts of Patterson show that the purchase would increase its annual after-tax cash flow by $650,000 indefinitely. The current market value of Bluntly Media is $10 million. The current market value of Patterson is $30 million. The appropriate discount rate for the incremental cash flows is 10%. Patterson is trying to decide whether it should offer 30% of its stock or $15 million in cash to Bluntly Media.

1. What is the value of Bluntly Media to Patterson? (1 marks)
2. What is the cost to Patterson of each alternative? (1 mark)
3. What is the NPV to Patterson of each alternative? (1 mark)
4. Which alternative should Patterson go with? (1 mark)