Question: Please Help step by Step 7. Penn Corporation is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition

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7. Penn Corporation 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 $2 million indefinitely. The current market value of Teller is $45 million and that of Penn is $91 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 40 percent of its stock or $61 million in cash to Tellers shareholders.

a. What is the cost of each alternative?

b. What is the NPV of each alternative?

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