Kappa International Is Thinking About Acquiring New Life Inc

Multiple Choice

Kappa International is thinking about acquiring New Life Inc. New Life generated net cash flows of $13 million last year. This cash flow has been growing at a four percent rate, which is expected to continue into the foreseeable future. Kappa has 10 million shares of common stock outstanding on which stockholders earn a return of about 14%, while New Life has 15 million shares outstanding on which stockholders earn a return of 13%. What is the maximum price per share that Kappa International should offer for New Life?

A) $9.01
B) $9.28
C) $9.62
D) $10.01