Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can someone please solve this question? answers in this photo are wrong answers are not 7.00, 35 and 19.30 Velcro Saddles is contemplating the acquisition

can someone please solve this question? answers in this photo are wrong answers are not 7.00, 35 and 19.30
image text in transcribed
Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated. The values of the two companies as separate entities are $60 million and $30 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $700,000 per year in perpetuity. Velcro Saddles is willing to pay $35 million cash for Skiers'. The opportunity cost of capital is 10%. a. What is the gain from the merger? Note: Enter your answer in millions rounded to 2 decimal places. b. What is the cost of the cash offer? Note: Enter your answer in millions. c. What is the NPV of the acquisition under the cash offer? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated. The values of the two companies as separate entities are $60 million and $30 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $700,000 per year in perpetuity. Velcro Saddles is willing to pay $35 million cash for Skiers'. The opportunity cost of capital is 10%. a. What is the gain from the merger? Note: Enter your answer in millions rounded to 2 decimal places. b. What is the cost of the cash offer? Note: Enter your answer in millions. c. What is the NPV of the acquisition under the cash offer? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Financial Management

Authors: Jeff Madura, Roland Fox

4th Edition

147372550X, 9781473725508

More Books

Students also viewed these Finance questions

Question

What has been your desire for leadership in CVS Health?

Answered: 1 week ago

Question

Question 5) Let n = N and Y Answered: 1 week ago

Answered: 1 week ago

Question

What laws were probably being violated?

Answered: 1 week ago