Dunbar Hardware,a National Hardware Chain,is Considering Purchasing a Smaller Chain,Eastern

question 68

Multiple Choice

Dunbar Hardware,a national hardware chain,is considering purchasing a smaller chain,Eastern Hardware.Dunbar's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million,and they have determined that the appropriate discount rate for valuing Eastern is 16%.Eastern has 4 million shares outstanding and no debt.Eastern's current price is $16.25.What is the maximum price per share that Dunbar should offer?

• A)$16.25
• B)$16.97
• C)$17.42
• D)$18.13

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Definitions:

Credit Sales

Transactions in which goods or services are provided to a customer with the agreement that payment will be made at a later date.

Credit Card Sales

Transactions in which goods or services are purchased using a credit card, immediate revenue for the seller, albeit often with processing fees deducted by the credit card processor.

Credit Sales

Sales where payment is deferred to a later date, typically generating receivables for the selling entity.

Sales Returns

Goods returned by customers to the seller for a refund or credit, often due to defects or dissatisfaction.