2) You work for a leveraged buyout firm and are evaluating a potential buyout of Associated Steel. Associated Steel's stock price is $20 and it has 10 million shares outstanding. You believe that if you buy the company and replace its management, its value will increase by 100%. You are planning on doing a leveraged buyout of Associated Steel, and will offer $20 per share for control of the company.

Next you realize that given that other shareholders do not benefit from the LBO they have no incentive to sell you their shares at $20. So you decide to raise your tender offer to $25 per share.

1. What will be the share price after the LBO for non-tendered shares?
2. Based on the your answer to the previous question, will shareholders tender their share at $25?
3. If you are to choose a tender offer, what would your offer be?