Question: Midler Cosmetics in Problem P11 55B holds significant promise for carving

Midler Cosmetics in Problem P11-55B holds significant promise for carving a niche in its industry. In P11-55B, the following information was taken from the records of Midler Cosmetics, Inc., at December 31, 2014:

A group of Irish investors is considering purchasing the company’s outstanding common stock. Midler’s stock is currently selling for $ 38 per share. A Better Life Magazine story predicted the company’s income is bound to grow. It appears that Midler can earn at least its current level of income for the indefinite future. Based on this information, the investors think that an appropriate investment capitalization rate for estimating the value of Midler’s common stock is 7%. How much will this belief lead the investors to offer for Midler Cosmetics? Will Midler’s existing stockholders be likely to accept this offer? Explain youranswers.

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  • CreatedJuly 25, 2014
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