Ch23 MA extra exercise.ppt - Exercise Merger NPV Chatham...

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Exercise: Merger NPV Chatham Foods, which has 1 million shares outstanding, wishes to merge with Kent Drinks with 2.5 million shares outstanding. The market prices for Chatham Foods and Kent Drinks are $49 and $18 per share, respectively. The merger could create an estimated savings of $800,000 annually for the indefinite future. Assume Chatham Foods were willing to pay $25 per share for Kent Drinks, and the appropriate cost of capital is 14 percent.
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