QUESTION 20 (16 PTS) T ore power 55% . Kelley Inc.'s board of directors has agreed to acquire Dumont Co. Both firms have no debt. Kelley believes that the acquisition will increase its total after-tax annual cash flow by $2,0 Million indefinitely. The current market value of Kelley is $80 Million, and that of Dumont is $35 Million. The appropriate discount rate for the incremental cash flows is 8%. Kelley's board is trying to decide if they should offer 30% of its stock or $50 Million in cash to Dumont's sharcholders. What would be your recommendation to the board? Compute the requested analysis figures below to justify your answer. (20A) (9 PTS) 46 NPV to Acquirer = (with cash offer) NPV to Acquirer = (with stock offer) 2 MM Recommendation: Circle One Cash OR Stock DI O 1:11 4. 55% (20B) (5 PTS) What a % of stock offer) would make Kelley indifferent between choosing cash or stock as the consideration? . 0 MM III 1:11 @ (200) (2 PT) What rate is appropriate for discounting the incremental cash flows? (i.e., in words, what does the 8% above represent or what is it called?) QUESTION 21 (12 PTS) L QUESTION 20 (16 PTS) T ore power 55% . Kelley Inc.'s board of directors has agreed to acquire Dumont Co. Both firms have no debt. Kelley believes that the acquisition will increase its total after-tax annual cash flow by $2,0 Million indefinitely. The current market value of Kelley is $80 Million, and that of Dumont is $35 Million. The appropriate discount rate for the incremental cash flows is 8%. Kelley's board is trying to decide if they should offer 30% of its stock or $50 Million in cash to Dumont's sharcholders. What would be your recommendation to the board? Compute the requested analysis figures below to justify your answer. (20A) (9 PTS) 46 NPV to Acquirer = (with cash offer) NPV to Acquirer = (with stock offer) 2 MM Recommendation: Circle One Cash OR Stock DI O 1:11 4. 55% (20B) (5 PTS) What a % of stock offer) would make Kelley indifferent between choosing cash or stock as the consideration? . 0 MM III 1:11 @ (200) (2 PT) What rate is appropriate for discounting the incremental cash flows? (i.e., in words, what does the 8% above represent or what is it called?) QUESTION 21 (12 PTS) L