QUESTION 7 1. Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition will increase its total aftertax annual cash flow by $1,456,661.87 indefinitely. The current market value of Teller is $23,546,498 and that of Penn is $64,785,186. The appropriate discount rate for the incremental cash flow is 15.02%. Penn is trying to decide whether it should offer 38% of its stock or $35,658,991 in cash to Teller's shareholders. What is the NPV of the stock offer? HINT: Subtract the equity cost (as computed in the previous problem) from the value of the combined firm.

QUESTION 8 1. Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition will increase its total aftertax annual cash flow by $1,175,966.77 indefinitely. The current market value of Teller is $25,056,020 and that of Penn is $69,274,281. The appropriate discount rate for the incremental cash flow is 14.71%. Penn is trying to decide whether it should offer 36% of its stock or $32,031,431 in cash to Teller's shareholders. What is the NPV of the cash offer? HINT: Subtract the cash offer from the value of the combined firm.