Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca and the acquisition would allow Orca to better control itsmaterial supply. The current cash flow from assets for Shark is $7 million. The cash flows are expected to grow at 8 percent for the next five years before leveling offto 5 percent for the indefinite future. The costs of capital for Orca and Shark are 12 percent and 10 percent, respectively. Shark currently has 3 million shares of stockoutstanding and $25 million in debt outstanding.What is the maximum price per share Orca should pay for Shark?47.4250.6575.8535.45

Year Previous Cash FlowGrowth Factor(1+Growth Rate)Cash flow for the year(in million) Cash flow/…

Answered: Orca Industries is considering the…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter26: Real Options

Section: Chapter Questions

Problem 3P: Wansley Lumber is considering the purchase of a paper company, which would require an initial...

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Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca and the acquisition would allow Orca to better control its material supply. The current cash flow from assets for Shark is $7.4 million. The cash flows are expected to grow at 9 percent for the next five years before leveling off to 6 percent for the indefinite future. The costs of capital for Orca and Shark are 13 percent and 11 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price per share
Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca and the acquisition would allow Orca to better control its material supply. The current cash flow from assets for Shark is $8.3 million. The cash flows are expected to grow at 7 percent for the next five years before leveling off to 4 percent for the indefinite future. The costs of capital for Orca and Shark are 11 percent and 9 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca, and the acquisition would allow Orca to better control its material supply. The current cash flow from assets for Shark is $6.4 million. The cash flows are expected to grow at 9 percent for the next five years before leveling off to 6 percent for the indefinite future. The cost of capital for Orca and Shark is 13 percent and 11 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16, Price per share $ 45 47
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $7.1 million. The cash flows are expected to grow at 7 percent for the next five years before leveling off to 4 percent for the indefinite future. The costs of capital for Schultz and Arras are 11 percent and 9 percent, respectively. Arras currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Schultz should pay for Arras? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price per share $ 67.63
Please answer multi-choice question in photo.
Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies as separate entities are $20 million and $10 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $500,000 per year in perpetuity. Velcro Saddles is willing to pay $14 million cash for Skiers’. The opportunity cost of capital is 8%. a. What is the gain from the merger? b. What is the cost of the cash offer? c. What is the NPV of the acquisition under the cash offer? Please answer fast i give you upvote.
Acme Co is considering an acquisition of Pinder Co at the end of the current year. Acme expects to generate $5 million in cash flows next year, after which the cash flows will grow by 2% per year in perpetuity. Pinder expects to generate $2 million in cash flows next year, after which the cash flows will grow by 3% per year in perpetuity. After the acquisition, Acme expects to be able increase its cash flows by $300,000 per year in perpetuity. This increase in cash flows is attributable to the assets owned by Pinder. Acme's beta is 1.2 and has 4,000,000 shares outstanding. Pinder's beta is 0.8 and has 2,000,000 shares outstanding. The risk-free rate is 2% and the market risk premium is 8%. Both Acme and Pinder have no debt. The share prices for Acme and Pinder are equal to the discounted present value of future cash flows. All cash flows occur at the end of the year. (a) If Acme pays $20 per share acquire Pinder, what is the value of the net benefit to Acme shareholders from the…
Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies as separate entities are $50 million and $25 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $650,000 per year in perpetuity. Velcro Saddles is willing to pay $27 million cash for Skiers’. The opportunity cost of capital is 10%. a. What is the gain from the merger? (Enter your answer in millions rounded to 2 decimal places.) b. What is the cost of the cash offer? (Enter your answer in millions.) c. What is the NPV of the acquisition under the cash offer? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
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