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Question 12 (9 points) As the financial manager of Big Y, you are investigating the possibility of acquiring Price Chopper. You have the following data
Question 12 (9 points) As the financial manager of Big Y, you are investigating the possibility of acquiring Price Chopper. You have the following data about both companies: Big Y (A) Price Chopper (B) Earnings per share $ 5 $ 1.5 Dividend per share $3 $ 0.8 Number of shares 1 million 0.6 million Stock price $90 $20 You estimate that investors currently expect a steady growth of about 6% for Price Chopper's earnings and dividends. Under the new management, this growth rate would increase to 8% per year, without any additional capital investment required. a) What is the financial gain from the acquisition? b) What is the cost of the acquisition if Big Y pays $25 in cash for each share of Price Chopper
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