Answer Happy

Question 4 Axiata Bhd is analyzing the possible to acquire of Telenor Asia. It is on a smaller scale involving only Malaysian operations. Both firms are free from debt. Axlata believes the acquisition will increase its total after tax annual cash flow by RM1.5 million indefinitely. The current market value of Telenor Asia is RM43 million, and that Axiata is RM60 million. The appropriate discount rate for the incremental cash flows is 10 percent. Axiata is trying to decide whether it should offer 50 percent of its stock or RM50 million in cash to Telenor shareholders. (a) Calculate the cost of the acquisition. (2 marks) (b) Calculate the Net Present Value (NPV) of both alternatives. (7 marks) (c) Based on the answer at (b) which alternative should Axiata Malaysia choose. 11 marta