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BQ. Incorporated, is considering making an offer to purchase Report Publications. The vice president of finance has collected the following information: Price-earnings ratio Shares outstanding Earnings Dividends iReport 12.4 8.9 1,600,000 170,000 $4,700,000 $685,000 $970,000 $420,000 BQ BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 5 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would BQ's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If BQ were to offer $35 in cash for each share of iReport, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) d. What's the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of iRopor

BQ. Incorporated, is considering making an offer to purchase Report Publications. The vice president of finance has collected the following information: Price-earnings ratio Shares outstanding Earnings Dividends iReport 12.4 8.9 1,600,000 170,000 $4,700,000 $685,000 $970,000 $420,000 BQ BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 5 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would BQ's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If BQ were to offer $35 in cash for each share of iReport, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) d. What's the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of iRopor

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach
Section: Chapter Questions
Problem 11PC: Whirlpool manufactures and sells home appliances under various brand names. IBM develops and...
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BQ. Incorporated, is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information: Price-earnings ratio Shares outstanding Earnings Dividends BQ iReport 12.4 8.9 1,600,000 170,000 $4,700,000 $685,000 $970,000 $420,000 BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 5 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,. 32.16.) b. What would BQ's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) c. If BQ were to offer $35 in cash for each share of Report, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) a. Value of iReport b. Gain c. NPV d. Maximum share price e. NPV d. What's the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.)
Transcribed Image Text:BQ. Incorporated, is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information: Price-earnings ratio Shares outstanding Earnings Dividends BQ iReport 12.4 8.9 1,600,000 170,000 $4,700,000 $685,000 $970,000 $420,000 BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 5 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,. 32.16.) b. What would BQ's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) c. If BQ were to offer $35 in cash for each share of Report, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) a. Value of iReport b. Gain c. NPV d. Maximum share price e. NPV d. What's the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.)
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