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a)Find the value of Firm T with synergies and Firm As gain from acquisition. 1. Firm A is considering acquiring Firm T. Below is the
a)Find the value of Firm T with synergies and Firm As gain from acquisition.
1. Firm A is considering acquiring Firm T. Below is the premerger information for each firm. Both firms have no debt. Firm A (acquiring firm) Firm T (target firm) Price per share Total Dividends Number of shares outstanding $100 $20,000,000 10,000,000 $30 $3,000,000 3,000,000 Before the acquisition, dividends of Firm T are expected to grow at a constant rate of 5 percent each year forever. Firm A expects the acquisition will increase this growth rate to 6.5 percent per year because of the synergies. Ignore transaction costs for the acquisition 1. Firm A is considering acquiring Firm T. Below is the premerger information for each firm. Both firms have no debt. Firm A (acquiring firm) Firm T (target firm) Price per share Total Dividends Number of shares outstanding $100 $20,000,000 10,000,000 $30 $3,000,000 3,000,000 Before the acquisition, dividends of Firm T are expected to grow at a constant rate of 5 percent each year forever. Firm A expects the acquisition will increase this growth rate to 6.5 percent per year because of the synergies. Ignore transaction costs for the acquisitionStep by Step Solution
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