Question
3. Global Tours is analyzing the possible acquisition of Eastern Vacations. Due to the improved efficiency, Global Tours estimates that the combined firm could save
3. Global Tours is analyzing the possible acquisition of Eastern Vacations. Due to the improved efficiency, Global Tours estimates that the combined firm could save $600,000 of annual after tax cash flows for the indefinite future. An investment bank estimates that Global Tours are worth $30m and $15m respectively. Global Tours uses 15% opportunity cost of capital to discount its incremental cash flows.
- What is the synergy from the merger?
- If Global Tours offers $16m cash for Eastern Vacations, what is the premium (cost) of the merger? What is the NPV of the merger?
- If Global Tours offers 35% of the combined firm to owners of Eastern Vacations, what is the premium (cost) of the merger? What is the NPV of the merger?
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Public Finance In Canada
Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon
5th Canadian Edition
1259030776, 978-1259030772
