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Please help answer part a and b - all the values in blank! Penn Corp. is analyzing the possible acquisition of Teller's Company. Both firms
Please help answer part a and b all the values in blank!
Penn Corp. is analyzing the possible acquisition of Teller's Company. Both firms have no debt. Penn believes the acquisition will increase its total after-tax annual cash flow by $3 million indefinitely. The current market value of Teller's is $50 million, and that of Penn is $78 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 45 percent of its stock or $71 million in cash to Teller's shareholders. o. What is the cost of each alternative? (Do not round intermediate calculations. Enter the final answer in dollars, not millions of dollars. Omit "S" sign in your response.) Cash cost Equity cost b. What is the NPV of each alternative? (Do not round intermediate calculations. Enter the finel answer in dollars, not millions of dollars. Omit "S" sign in your response.) NPV cash NPV stock c. Which alternative should Penn choose? o Acquire the company for stock. @ Acquire the company for cash.
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