Alpha Corp Is Thinking About Acquiring Omega Inc

Essay

Alpha Corp is thinking about acquiring Omega Inc. Omega generated cash of $50M last year and is expected to grow at 5% indefinitely. Alpha expects synergies of at least $15M per year after the merger which will also grow at 5%. Omega has 20M shares of common stock outstanding on which stockholders earn a return of about 15%. What is the maximum price per share Alpha should offer for Omega?