Question: Please Answer A B & C. Cash versus Stock Payment Penn Corp. is analyzing the possible acquisition of Teller Company. Both x firms have no

Please Answer A B & C. Cash versus Stock Payment Penn

Please Answer A B & C.

Cash versus Stock Payment Penn Corp. is analyzing the possible acquisition of Teller Company. Both x firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flow by $1.15 million indefinitely. The current market value of Teller is $24 million and that of Penn is $67 million. The appropriate discount rate for the incremental cash flows is 11 percent. Penn is trying to decide whether it should offer 32 percent of its stock or $33 million in cash to Teller's shareholders. a. What is the cost of each alternative? b. What is the NPV of each alternative? c. Which alternative should Penn choose

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