Riptide Inc., a swimwear company, is considering acquiring a string of Beachtime Inc., a retail store chain. Beachtime is expected to generate $ 30 million in after-tax cash flows next year, prior to debt payments, growing 2% a year in perpetuity. You are given the cost of equity and capital for both companies individually and the combined company:

	Cost of Equity	Cost of Capital
Riptide	8%	7%
Beachtime	12%	11%
Combined	10%	9%

Assuming that there is no synergy, what is the most that Riptide can pay for Beachtime?

a.

111.11

b.

333.33

c.

444.44

d.

222.22