Pendulum Corp

question 24

Multiple Choice

Pendulum Corp. is considering making a tender offer for Poe Inc.  Pendulum's management is conservative and insists that the deal make financial sense based cash flows projected no more than five years into the future, which have been estimated as follows: Year     1     2     3     4 5
Cash flow $3.4M $3.7M $4.0M $4.0M        $4.2M
Pendulum has also determined that the appropriate risk adjusted discount rate for the analysis is 9.0%.  If Poe has 400,000 shares outstanding, what is the maximum per share price Pendulum should be willing to pay for Poe's stock?

• A)$37.00
• B)$37.21
• C)$40.00
• D)$42.21

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Definitions:

Organizational Effectiveness

A measure of how successfully an organization achieves its goals and objectives, often evaluated through performance, adaptability, and sustainability.

External Environment

The external environment of an organization includes all outside factors and forces that affect its operations, ranging from economic, socio-cultural, legal, technological, to political conditions.

Environmental Uncertainty

The extent to which an organization lacks information or control over the elements of its environment, affecting decision-making and strategy.

Opportunities

Chances or situations that can lead to the advancement or progress in a person's career, business, or other aspects of life.