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As a corporate finance analyst specializing in M&A deals, you are given the following pre-merger information about Jupiter, the bidding firm and Venus, the target
As a corporate finance analyst specializing in M\&A deals, you are given the following pre-merger information about Jupiter, the bidding firm and Venus, the target firm. Assume that both firms have no debt outstanding. Jupiter has estimated that the value of the synergistic benefits from acquiring Venus is $6,000. i) If Venus is willing to be acquired for $20.50 per share in cash, compute the NPV of the merger. (4 marks) ii) Calculate the price per share of the merged firm based on your answer in part (i). (4 marks) iii) Suppose Venus is agreeable to a merger by an exchange of stock. If Jupiter offers one of its shares for every two of Venus's shares, compute what will the price per share of the merged firm be? (6 marks) iv) Based on your answer in part (iii), calculate the NPV of the merger. (4 marks) v) Explain which financing method (cash or stock exchange) is more attractive for Venus's shareholders. (2 marks)
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