Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition will increase its total aftertax annual cash flow by $1,509,416.18 indefinitely. The current market value of Teller is $22,463,984 and that of Penn is $71,248,044. The appropriate discount rate for the incremental cash flow is 13.85%. Penn is trying to decide whether it should offer 33% of its stock or $30,626,811 in cash to Teller's shareholders.

What is the equity cost of the acquisition?

HINT: Compute the value of the combined firm by adding the current value of the target with the present value of the differential cash flow of the combined firm. To determine the equity cost of the acquisition, add the current value of the acquirer and then multiply by the proposed percentage of the stock that has been offered for the firm.