Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Plant, Inc. is considering making an offer to purchase Palmer Corp. Plant's vice president of finance has collected the following information: Plant Palmer Price earnings

image text in transcribed
Plant, Inc. is considering making an offer to purchase Palmer Corp. Plant's vice president of finance has collected the following information: Plant Palmer Price earnings ratio 16.4 12.7 Shares outstanding 1,690,000 940,000 Earnings $ 4,698,200 $ 1,193,800 Dividends $ 1,069.000 $ 489.000 Plant also knows that securities analysts expect the earnings and dividends of Palmer to grow at a constant rate of 5 percent each year. Plant management believes that the acquisition of Palmer will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year a. What is the value of Palmer to Plant? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) Value of Palmer $ 37,736,544 b. What would Plant's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) Gain 22,575,284 c. If Plant were to offer 533 in cash for each share of Palmer, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e... 32.16.) NPV d. What is the most Plant should be willing to pay in cash per share for the stock of Palmer? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum bid price e. If Plant were to offer 244 000 of its shares in exchange for the outstanding stock of Palmer, what would the NPV be? (Do not round intermediate calculations and round your answer to 2 decimal places. e....32.16.) NPV Plant's outside financial consultants think that the 7 percent growth rate is too optimistic and a 6 percent rate is more realistic 1.1. If Plant still offers $33 por share what is the NPV with this new growth rate? (A negative answer should be indicated by a minus sign. Do not found intermediate calculations and round your answer to 2 decimal places. e... 32.16.) NPV 1.2. If Plant still offers 244 000 shares what is the NPV with this new growth rata (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g.32.16.) NPV

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Behavioral Finance And Capital Markets

Authors: A. Szyszka

5th Edition

1137338741, 9781137338747

More Books

Students also viewed these Finance questions

Question

Illustrate the systems approach of family therapy.

Answered: 1 week ago

Question

Describe the concept of diversity and diversity management.

Answered: 1 week ago

Question

How does the EEOC define sexual harassment?

Answered: 1 week ago