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37) AutoTek, Inc., is contemplating the acquisition of HiBot Inc. The values of the two...

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37) AutoTek, Inc., is contemplating the acquisition of HiBot Inc. The values of the two companies as separate entities are $20 mil and $10 mil, respectively. AutoTek estimates that by combining the two companies, it will reduce marketing and administration costs by $550 000 per year in perpetuity. AutoTek can either pay $19 million cash for HiBot or offer HiBot a 45% holding in AutoTek. The opportunity cost of capital is 10%. What is the NPV of the acquisition under the cash offer and the stock offer? A) NPV of cash offer is $1.5 mil and NPV of stock offer is -$2.23 mil B) NPV of cash offer is $1.0 mil and NPV of stock offer is -$2.50 mil C) NPV of cash offer is -$4.0 mil and NPV of stock offer is -$0.75 mil D) NPV of cash offer is -$3.5 mil and NPV of stock offer is -$2.23 mil E) NPV of cash offer is $1.5 mil and NPV of stock offer is -$0.48 mil

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