Fly-By-Night Couriers is analyzing the possible acquisition of Flash-in-the-Pan Restaurants. Neither firm has debt. The

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Fly By Night Couriers Is Analyzing The Possible Acquisition Of Flash In The Pan Restaurants Neither Firm Has Debt The 1 (84.63 KiB) Viewed 64 times

Fly-By-Night Couriers is analyzing the possible acquisition of Flash-in-the-Pan Restaurants. Neither firm has debt. The forecasts of Fly-By-Night show that the purchase would increase its annual aftertax cash flow by $380,000 indefinitely. The current market value of Flash-in-the-Pan is $8 million. The current market value of Fly-By-Night is $28 million. The appropriate discount rate for the incremental cash flows is 8 percent. Fly-By- Night is trying to decide whether it should offer 30 percent of its stock or $11 million in cash to Flash-in-the-Pan. What is the synergy from the merger? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) What is the value of Flash-in-the-Pan to Fly-By-Night? (Do not round intermediate b. calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) What is the cost to Fly-By-Night of each alternative? (Do not round intermediate c. calculations and enter your answers in dollars, not millions of dollars, e.g. 1,234,567.) What is the NPV to Fly-By-Night of each alternative? (Do not round intermediate d. calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) Synergy value $ 4,750,000 a. b. Value $ 12,750,000 C. Cost of cash $ 11,000,000 Cost of stock d. NPV of cash $ 1,750,000 NPV of stock