Problem:
Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flow by $1.1 million indefinitely. The current market value of Teller is $47 million, and that of Penn is $66 million. The appropriate discount rate for the incremental cash flows is 10 percent.
Required:
Question: If Penn has decided to offer 40 percent of its stock to Teller's shareholders, what is the cost of the stock offer?
Note: Please show guided help with steps and answer.