Question PARK&SHOP and WELLCOME are operating supermarkets in Hong Kong. They are competing with each other in terms of price and products. PARK&SHOP is considering the possible acquisition of WELLCOME. Both companies have no debt. PARK&SHOP estimates that the acquisition will create synergy by increasing its total after-tax annual cash flows by $2.4 million forever. The current market value of WELLCOME is $58 million, and that of PARK&SHOP is $107 million. The discount rate for the incremental cash flows is 10%. PARK&SHOP tries to determine whether it should offer 40% of its stock or $73 million in cash to WELLCOME's shareholders. Required: (a) What is the cost of each alternative? (b) Calculate the net present value of each alternative. Suggest which alternative PARK&SHOP should choose. (c) Justify three rationales for a company to consider acquisition. Question PARK&SHOP and WELLCOME are operating supermarkets in Hong Kong. They are competing with each other in terms of price and products. PARK&SHOP is considering the possible acquisition of WELLCOME. Both companies have no debt. PARK&SHOP estimates that the acquisition will create synergy by increasing its total after-tax annual cash flows by $2.4 million forever. The current market value of WELLCOME is $58 million, and that of PARK&SHOP is $107 million. The discount rate for the incremental cash flows is 10%. PARK&SHOP tries to determine whether it should offer 40% of its stock or $73 million in cash to WELLCOME's shareholders. Required: (a) What is the cost of each alternative? (b) Calculate the net present value of each alternative. Suggest which alternative PARK&SHOP should choose. (c) Justify three rationales for a company to consider acquisition