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XYZ industries is considering the purchase of ABC company. ABC is currently a supplier for XYZ. The current cash flow from assets for ABC is
XYZ industries is considering the purchase of ABC company. ABC is currently a supplier for XYZ. The current cash flow from assets for ABC is $7.1 Million.The cash flows are expected to grow at 10 percent per year for the next five years before travelling off to 4 percent for the indefinite future. The cost of capital for XYZ and ABC are 11 percent and 9 percent, respectively. ABC currently has 2.5 millions share of stock outstanding and $44 million in debt outstanding. WHat is the maximum price per share XYZ should pay for ABC?
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