Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca, and the acquisition wou allow Orca to better control its material supply. The current cash flow from assets for Shark is $6.4 million. The cash flows are exp 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 an 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

Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca, and the acquisition wou allow Orca to better control its material supply. The current cash flow from assets for Shark is $6.4 million. The cash flows are exp 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 an 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

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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