Question
T Inc. is considering the acquisition of GreenVeg at a cash price of $7,200,000. T Inc. have annual earnings of $3,500,000 and $600,000, respectively. When
T Inc. is considering the acquisition of GreenVeg at a cash price of $7,200,000. T Inc. have annual earnings of $3,500,000 and $600,000, respectively. When they merge it is expected that $400,000 additional cash flow will be generated next year and the cash flow will continue to grow at 2% per annum thereafter. The merged firm's cost of capital is expected to be 10%. T Inc. has 4,000,000 shares on issue and Veg Inc. has 1,200,000 shares on issue. The current share prices of T Inc. and Veg Inc. are $8 per share and $5 per share, respectively. Please note that the money for the cash offer of $7,200,000 will be raised by selling new shares.
what the NPV of the merger. the share price after the merger.and the P/E ratio after the merger.
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