Problem 3 (25 points) Penn Corp. 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 $1.6 million indefinitely. The current market value of Teller is $42 million, and that of Penn is $74 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 $42 million in cash to Teller's shareholders. a) What is the cost of each alternative? (14 points)