Accounting cash flow? Harrison Ltd. is considering acquiringPugs International Inc. Pugs had cashflows of $15 million last year and has 2.5million shares outstanding which arecurrently selling at $29 per share. Thediscount rate for analysis has beencorrectly estimated at 14%.How much should Harrison be willing topay for Pugs in total and per share if thefirm is not expected to grow significantlyand management insists that acquisitionsbe justified by no more than ten years ofprojected cash flows?

Step 1:- Define Discounted Cash FlowThe discounted cash flow (DCF) is a valuation approach that…

Answered: Harrison Ltd. is considering acquiring…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 $1 million indefinitely. The current market value of Teller is $53 million and that of Penn is $87 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 $59 million in cash to Teller's shareholders. a. What is the cost of each alternative? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What is the NPV of each alternative? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) $ 66,000,000,000,000 a. Cash cost a. Equity cost $ b. NPV cash b. NPV equity 66 c. Which alternative should Penn choose?
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Love Inc. believes that at its current share price of P16.00 the firm is undervalued. Makeover plans to repurchase 2.4 million of its 20 million shares outstanding. The Po Inc.’s managers expect that they can repurchase the entire 2.4 million shares at the expected equilibrium price after the repurchase. The Love Inc.’s current earnings are P44,000,000. If management’s assumptions hold, answer the following,1 .The current earnings per share is 2.What is the price to earnings ratio? 3.How much is the earnings per share after the repurchase? 4.What is the expected per-share market price after repurchase?
Our acquisition target is a privately held company in a growing industry. The target has recently borrowed $100 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. We expect the company to produce free cash flows of -$10 million in one year, $30 million in two years, and $36 million in three years. After three years, free cash flow will grow at a rate of 5%. Its WACC is 15% and it currently has 5 million shares of stock. Find price per share. Group of answer choices 37.24 42.33 28.96 32.74

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