Trax Industries is considering the purchase of Duke Manufacturing. Duke is currently a supplier for Trax, and the acquisition would allow Trax to better control its material supply. The current cash flow from assets for Duke is $8 million. The cash flows are expected to grow at 6 percent for the next five years before levelling off to 4 percent for the indefinite future. The weighted average cost of capital used for the valuation of Duke is 9 percent. Duke currently has 3 million shares of stock outstanding and $22 million in debt outstanding. What is the maximum price per share Trax should pay for Duke? O A. $53.181 O B. $63.181 OC. $60.51 O D. $55.85

Trax Industries is considering the purchase of Duke Manufacturing. Duke is currently a supplier for Trax, and the acquisition would allow Trax to better control its material supply. The current cash flow from assets for Duke is $8 million. The cash flows are expected to grow at 6 percent for the next five years before levelling off to 4 percent for the indefinite future. The weighted average cost of capital used for the valuation of Duke is 9 percent. Duke currently has 3 million shares of stock outstanding and $22 million in debt outstanding. What is the maximum price per share Trax should pay for Duke? O A. $53.181 O B. $63.181 OC. $60.51 O D. $55.85

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 31P

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