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 $6.8 million. The cash flows are expected to grow at 5 percent for the next five years before leveling off to 2 percent for the indefinite future. The costs of capital for Orca and Shark are 9 percent and 7 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 $6.8 million. The cash flows are expected to grow at 5 percent for the next five years before leveling off to 2 percent for the indefinite future. The costs of capital for Orca and Shark are 9 percent and 7 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
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...
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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 $6.8 million. The cash flows are
expected to grow at 5 percent for the next five years before leveling off to 2 percent for
the indefinite future. The costs of capital for Orca and Shark are 9 percent and 7 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F751deede-6f02-4a47-9a0f-34dd78dd8b34%2F1a5168f5-8301-4554-878f-5df2994f49f2%2Fwup2688_processed.png&w=3840&q=75)
Transcribed Image Text: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 $6.8 million. The cash flows are
expected to grow at 5 percent for the next five years before leveling off to 2 percent for
the indefinite future. The costs of capital for Orca and Shark are 9 percent and 7 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
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