Penn corp is analyzing the possible acquisition of teller, Financial Management

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Penn corp is analyzing the possible acquisition of teller

Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total after-tax annual cash flows by $1.7 million indefinitely. The current market value of Teller is $42 million, and the market value of Penn is $82 million. The appropriate discount rate for the incremental cash flows is 10%. Penn is trying to decide whether it should offer 40% of its stock or $67 million in cash to Teller's shareholders.

What is the NPV using the cash offer?

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Financial Management: Penn corp is analyzing the possible acquisition of teller

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