Q4 : ca): EPSTD + ++ 2's given PT = 9.2 X 3. 657= 33- 6444$ PPST 2's given as well VT = 1. 77 X CHO.1) 33. 6494 + 0.05 = 0.1052 PT = 1.77 x ( 170. 06) with the new 0./052 - 0-06 = 41-51$ growth rate 175000 X 41-51 = 7264250 $ (b ): Earnings for Howard: 3.657X 175000= 639975$ is the pre-merger market value :. Gazn : 7264250- 639975= 7264 6624275$ ( C ) : NPV = 726450 - 38X 17JOOD =-392 3 614250$ cd) : Maximum bid price : 38 + 614250 175000 e ($) : pre-merger market value of Blenheim =) 3X1300000 X 14 5 = 1- 6JJODDO$ :. PAT = ( 5 65 50000+ 7264250) ( 1300000 +Blenheim PLC is considering making an offer to purchase Howard Department Store. The vice president of finance has collected the following information: Blenheim Howard P/E ratio 14.5 9.2 Number of shares outstanding (million) 1.30 0.175 Earnings per share 3.000 3.657 Dividends per share ($) 0.73 1.77 Blenheim also knows that securities analysts expect the earnings and dividends of Howard to grow at a constant rate of 5 percent each year. Blenheim management believes that the acquisition of Howard will provide the firm with some economies of scale that will increase this growth rate to 6 percent per year. Required: a) What is the value of Howard to Blenheim? (3 marks) b) What would Blenheim's gain be from this acquisition? (2 marks) c) IfBlenheim were to offer $38 in cash for each share of Howard, what would the NPV of the acquisition be? (2 marks) d) What's the most Blenheim should be willing to pay in cash per share for the stock of Howard? (2 marks) e) If Blenheim were to offer one of its shares in exchange for 1.75 shares of Howard, what would the NPV be? (2 marks) f) If shares are exchanged in proportion to the current market price, what would be the NPV of the acquisition? (2 marks) g) Why NPV or gain of acquirer from all cash offer is greater than NPV or gain from a proportional stock offer? (2 marks)