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 $2 million indefinitely. The current market value of Teller is $54 million, and that of Penn is $84 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 45 percent of its stock or $72 million in cash to Teller’s shareholders. a. What is the cost of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i. e. 1,234,567.)
Cash cost$
Equity cost$
b. What is the NPV of each alternative? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars, i. e. 1,234,567.)
NPV cash$
NPV stock$
c. Which alternative should Penn choose?
Stock
Cash

Penn Corp.

a. Cost of each alternative:

Cash cost $72 million

Equity cost $37.8 million

b) The NPV of each alternative:

NPV cash -$52 million ($20 - $72)

NPV stock $20 million ($20 - $0)

c. The alternative to choose:

Stock.

There is no cash flow with the offer of 45% of Penn's stock to the shareholders of Teller.  Actually, there is no NPV with stock offer, except the administrative costs of issuing the shares to Teller's shareholders.

Explanation:

a) Data and Calculations:

After-tax annual cash flow = $2 million

Discount rate for the incremental cash flows = 10%

Present value of the perpetuity = $20 million ($2 m/10%)

Current market value of Teller = $54 million

Current market value of Penn = $84 million

Possible settlement options:

45% of stock = $37.8 million ($84 million * 45%)

Cash $72 million

the first successful, urban blues recording, selling more than 75,000 copies, was made in year 1920.

mamie smith recorded the first commercially successful example of the urban blues,   with the recording of “crazy blues”."crazy blues" was recorded on august 10, 1920, in new york city. within a month of the release of “crazy blues” it had sold 75,000 copies.

i might look it up later.