owners of Arthouse Inc., a national artist supplies chain, are contemplating purchasing Craftworks Inc, a smaller chain Arthouse'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 Craftworks is 16% Craftworks has 4 million shares outstanding and no debt Craftworks' current price is $16.25 What is the maximum price per share that Arthouse should offer?

Question

Quizplus · Accepted Answer

The maximum price per share Arthouse should offer is calculated by dividing the total present value of the merger benefits ($72.52 million) by the number of shares outstanding (4 million), which gives $18.13 per share.

Owners of Arthouse Inc