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3. Firm A tries to acquire Firm B. Assume that both firms have no debt outstanding. Firm A estimates that the value of synergistic benefits
3. Firm A tries to acquire Firm B. Assume that both firms have no debt outstanding. Firm A estimates that the value of synergistic benefits from Firm B is $10,000,000. Suppose Firm B prefers stock acquisition instead of cash acquisition of $30 per share. If Firm A offers one share for every two of Firm B's shares. 1) Figure out the number of stocks and the stock price of the merged firm. (20points) 2) Figure out the NPV of the merged firm.(20points) 3) Figure out the share exchange ratio of Firm A to Firm B where the shareholders of Firm B are indifferent between cash acquisition and stock acquisition. (20points)
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