Business, 28.11.2019 06:31 wesfleridor

How should the acquisition of mpis be financed, taking into account the issues of control, flexibility, income and risk? cash flows from stock offering (in million dollars) proceeds from stock offering $ 125.025 annual dividend payments $ (7.50) every year forever pv of payouts $ (125.000) npv $ 0.025 notes: in case they finance with debt, winfield (the company) would be able to enjoy the tax shield as a result of tax deductible interest expense, hence their effective cost of debt will be 4.225%. however, when financed with stock, the new stockholders will be entitled to perpetuity of $7.5m in dividends. working out the net present values of the two scenarios as shown in the tables above, debt financing becomes a favorable option to stock since it yields a higher npv.

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How should the acquisition of mpis be financed, taking into account the issues of control, flexibili...

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