1. The Blatford Corporation is acquiring Horatio Corporation for $11.25 million in cash. Blatford has 250,000 shares of stock outstanding at a market price of $39 a share. Horatio has 160,000 shares of stock outstanding at a market price of $15 a share. Neither firm has any debt. The expected synergy of the acquisition is $850,000. What will the share price of Blatford Inc. be, after the acquisition?

2. Concurrent with your studies you have been maintaining a 1,500 acre farm. You expect to deliver 135,000 bushels of oats to the market this coming September, with an average yield of 90 bushels per acre. In February you comitted to hedging your position at the closing prices shown in the table below, using a futures contract issued by Parrish and Heimbecker (P&H). At approximately 120 km round-trip you will spend close to one full month hauling oats next winter, so you'd like to make it worth your while. The contract looked quite attractive because P&H was offering a better settlement price than any of the local buyers.

Assume that the market price turns out to be 220.5 cents/bushel at the time you make your delivery in September. How much income will you receive in total from the hedged delivery of your oats? Oats contracts are priced in 5,000 bushel volumes, and prices are provided in cents per bushel. How many contracts will be required, to hedge your complete crop? What is the danger of hedging your complete forecasted production? Discuss.

	Open	High	Low	Settle
September	211.3	211.9	209.2	225.9

3. Simon purchased both a call and a put on 280,000 bushels of lentils. Both options have a strike price of $5.00/bushel and a common expiration date. Lentils contracts are based on 5,000 bushels. The price of lentils on the expiration date is $5.38/bushel. A. Ignoring all costs, calculate Simon's total option payoff for these two contracts. B. Assuming that a call costs Simon $0.15 per bushel and a put costs $0.11 per bushel, calculate Simon's total profit or loss on the two positions.