Question
In: Finance
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz...
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $7.7 million. The cash flows are expected to grow at 6 percent for the next five years before leveling off to 3 percent for the indefinite future. The costs of capital for Schultz and Arras are 10 percent and 8 percent, respectively. Arras currently has 3 million shares of stock outstanding and $25 million in debt outstanding.
What is the maximum price per share Schultz should pay for Arras?
Solutions
Expert Solution
Value of the Company Arras = $180.88 millions
Value of Equity = Value of Company - Value of Debt = $180.88 - $25 = $155.88 millions
Max price per share Schultz should pay For Arras = Value of Equity / Total Outstanding Shares
= $155.88 / 3 = $51.96 Answer
Kindly do inform me in case you have any queries.
jeff jeffy answered 2 years agoRelated Solutions
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years before leveling off to 5 percent for the indefinite future.
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Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz,...
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acquisition would allow Schultz to better control its material
supply. The current cash flow from assets for Arras is $8 million.
The cash flows are expected to grow at 9 percent for the next five
years before leveling off to 6 percent for the indefinite future.
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Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz,...
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acquisition would allow Schultz to better control its material
supply. The current cash flow from assets for Arras is $6.4
million. The cash flows are expected to grow at 9 percent for the
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Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz...
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acquisition would allow Schultz to better control its material
supply. The current cash flow from assets for Arras is $6.6
million. The cash flows are expected to grow at 7 percent for the
next five years before leveling off to 4 percent for the indefinite
future. The costs of capital for Schultz and Arras are 11 percent
and 9 percent, respectively. Arras...
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acquisition would allow Schultz to better control its material
supply. The current cash flow from assets for Arras is $7.8
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next five years before leveling off to 4 percent for the indefinite
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Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz...
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considering the purchase of Arras Manufacturing. Arras is currently
a supplier for Schultz and the acquisition would allow Schultz to
better control its material supply. The current cash flow from
assets for Arras is $7.3 million. The cash flows are expected to
grow at 5 percent for the next five years before leveling off to 2
percent for the indefinite future. The costs of capital for Schultz
and Arras are 9 percent and 7 percent, respectively. Arras...
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Schultz Industries is considering the purchase of Arras
Manufacturing. Arras is currently a supplier for Schultz, and the
acquisition would allow Schultz to better control its material
supply. The current cash flow from assets for Arras is $6.8
million. The cash flows are expected to grow at 5 percent for the
next five years before leveling off to 2 percent for the indefinite
future. The cost of capital for Schultz and Arras is 9 percent and
7 percent, respectively. Arras...
Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz,...
Schultz Industries is considering the purchase of Arras
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acquisition would allow Schultz to better control its material
supply. The current cash flow from assets for Arras is $7.6
million. The cash flows are expected to grow at 5 percent for the
next five years before leveling off to 2 percent for the indefinite
future. The cost of capital for Schultz and Arras is 9 percent and
7 percent, respectively. Arras...
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