The Bucket Company (Bucket) is evaluating acquiring The Shovel (Shovel) company to expand its product offering. The acquisition would cost Bucket $155 million. Bucket believes that Shovel would increase its annual cash flows by $12 million for the 20 years, at which point the company will explode.
A quick look at Bucket’5s Balance Sheet (January 31, 2019) and you find the following information:
Coupon paid semi annually, $1,000 Par Value $95,000,000
200,000 outstanding $18,980,000
A quick look at a financial website gives you the following information:
Required: Based on a Net Present Value calculation, financially speaking, should Bucket acquire Shovel?
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The Bucket Company (Bucket) is evaluating acquiring The Shovel (Shovel) company to expand its product offering. The...
Exercise 11-25 A recent stockholders' equity section of Aluminum Company of America (Alcoa) showed the following (in alphabetical order): additional paid-in capital $6,101, common stock $925, preferred stock $56, retained earnings $7,428, and treasury stock $2,828. (All dollar data are in millions.) The preferred stock has 557,740 shares authorized, with a par value of $100 and an annual $3.75 per share cumulative dividend preference. At December 31 of the current year, 557,649 shares of preferred are issued and 546,024 shares...
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Exercise 11-25 A recent stockholders' equity section of Aluminum Company of America (Alcoa) showed the following (in alphabetical order): additional paid-in capital $6,101, common stock $925, preferred stock $56, retained earnings $7,428, and treasury stock $2,828. All dollar data are in millions.) The preferred stock has 557,740 shares authorized, with a par value of $100 and an annual $3.75 per share cumulative dividend preference. At December 31 of the current year, 557,649 shares of preferred are issued and 546,024 shares...
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