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Problem 4-Corporate and Stock Valuation (25 Marks)???????(25?) Homobonus Industries is considering the purchase of Aquinas Manufacturing. Aquinas is currently a supplier for Homobonus, and the acquisition would allow Homobonus to better control its material supply. The current cash flow from assets for Aquinas is $7.5 million. The cash flows are expected to grow at 8 percent for the next five years before leveling off to 4 percent for the indefinite future. The cost of capital for Homobonus and Aquinas is 12 percent and 10 percent, respectively. Aquinas currently has 3 million shares of stock outstanding and $25 million in debt outstanding. Instruction: What is the maximum price per share Homobonus should pay for Aquinas? Please show the calculation. Homobonus Industries ?????? Aquinas Manufacturing?Aquinas ???Homobonus ? ???,?????? Homobonus ???????????Aquinas ?????????? 750?????????????????8%,????????????4%? Homobonus ? Aquinas ????????12%?10%????????300?????? ??2500????????? ????: Homobonus ???Aquinas????????????????????? 4

          Problem 4-Corporate and Stock Valuation (25 Marks)???????(25?)
Homobonus Industries is considering the purchase of Aquinas Manufacturing. Aquinas is currently
a supplier for Homobonus, and the acquisition would allow Homobonus to better control its material
supply. The current cash flow from assets for Aquinas is $7.5 million. The cash flows are expected
to grow at 8 percent for the next five years before leveling off to 4 percent for the indefinite future.
The cost of capital for Homobonus and Aquinas is 12 percent and 10 percent, respectively. Aquinas
currently has 3 million shares of stock outstanding and $25 million in debt outstanding.
Instruction:
What is the maximum price per share Homobonus should pay for Aquinas? Please show the
calculation.
Homobonus Industries ?????? Aquinas Manufacturing?Aquinas ???Homobonus ?
???,?????? Homobonus ???????????Aquinas ??????????
750?????????????????8%,????????????4%?
Homobonus ? Aquinas ????????12%?10%????????300??????
??2500?????????
????:
Homobonus ???Aquinas?????????????????????
4

Problem 4-Corporate and Stock Valuation (25 Marks)???????(25?)
Homobonus Industries is considering the purchase of Aquinas Manufacturing. Aquinas is currently
a supplier for Homobonus, and the acquisition would allow Homobonus to better control its material
supply. The current cash flow from assets for Aquinas is 7.5 million. The cash flows are expected
to grow at 8 percent for the next five years before leveling off to 4 percent for the indefinite future.
The cost of capital for Homobonus and Aquinas is 12 percent and 10 percent, respectively. Aquinas
currently has 3 million shares of stock outstanding and25 million in debt outstanding.
Instruction:
What is the maximum price per share Homobonus should pay for Aquinas? Please show the
calculation.
Homobonus Industries ?????? Aquinas Manufacturing?Aquinas ???Homobonus ?
???,?????? Homobonus ???????????Aquinas ??????????
750?????????????????8%,????????????4%?
Homobonus ? Aquinas ????????12%?10%????????300??????
??2500?????????
????:
Homobonus ???Aquinas?????????????????????
4

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