Overnight Express is analyzing the possible acquisition of package Delivery. The market value of Overnight is $49,500,000 and the current market price of its common stock is $80 per share. Package Delivery’s market value is $15,000,000. Overnight estimates the incremental value is $2,500,000, and the total price would be $16,000,000. If cash is used, what is the NPV of the proposed acquisition? What is the NPV if stock is used? Why is the NPV for a cash-financed merger greater than if stock is employed?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the proposed acquisition we need the cash flows associated ... View the full answer