Pendulum Corp

Multiple Choice

Pendulum Corp. is considering making a tender offer for Poe Inc.  Pendulum's management is conservative and insists that the deal make financial sense based cash flows projected no more than five years into the future, which have been estimated as follows: Year     1     2     3     4 5
Cash flow $3.4M $3.7M $4.0M $4.0M        $4.2M
Pendulum has also determined that the appropriate risk adjusted discount rate for the analysis is 9.0%.  If Poe has 400,000 shares outstanding, what is the maximum per share price Pendulum should be willing to pay for Poe's stock?

A) $37.00
B) $37.21
C) $40.00
D) $42.21