QUANTUM is about to announce a takeover bid for ELECTRODYNAMICS at a price of C100 per share.

QUANTUM is about to announce a takeover bid for ELECTRODYNAMICS at a price of C¼100 per share. The current share price is €90. Over the past six months the share price rose from €50 to its current level. The market index rose from 1,000, six months ago to its current level of 1,250. Assuming that the beta coefficient for ELECTRODYNAMICS equals 1.25, estimate the bid premium being paid by the acquiring firm. The risk-free rate is 5%. What qualifications, if any, would you put on your conclusions?