Question: please only answer question 37 parts b and c. thank you 77. Company A is considering making an offer to purchase Company B. Securities analysts

please only answer question 37 parts b and c.
thank you
 please only answer question 37 parts b and c. thank you
77. Company A is considering making an offer to purchase Company B.

77. Company A is considering making an offer to purchase Company B. Securities analysts expect the earnings and dividends of Company B to grow at a constant rate of 5% per year. Current dividend of Company B is $1.5 per share. Company A predicts the acquisition would provide Company B with some economies of scale that would improve this growth rate to 8% per year. a. What is the value of Company B to Company A? b. If Company A were to offer 750,000 of its shares in exchange for the outstanding stock of Company B, what would the NPV of the acquisition be? c. Should the acquisition be attempted, and if so, should it be a cash or stock offer? d. Company A's management thinks that 8% growth is to optimistic and that 6% is more realistic. How does change your previous answers

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!