Chapter 21 Mergers, Acquisitions, and Corporate Control 11. S 635 tock versus Cash Offers. As financial manager of Britwell Inc.. you are investigating a possible acquisition of Salome. You have the basic data given in the following table. Yos mate that investors expect a steady growth of about 6% in Salome's earnings and divi Under new management, this growth rate would be increased to 8% per year wit for additional capital. (LO21-2) hout the need Forecast earnings per share Forecast dividend per share Number of shares Stock price Britwell $5.00 $3.00 1,000,000 $90 Salome $1.50 $0.80 600,000 $20 a. What is the gain from the acquisition? b. What is the cost of the acquisition if Britwell pays $25 in cash for each share of Salome? c. What is the cost of the acquisition if Britwell offers one share of Britwell for every three shares of Salome? How would the cost of the cash offer change if the expected growth rate of Salome was not changed by the merger? How would the cost of the share offer change if the expected growth rate was not changed by the merger? d. Merger Gains. Immense Appetite Inc. believes that it can acquire Sleepy Industries and improve efficiency to the extent that the market value of Sleepy will increase by S5 million. Sleepy currently sells for $20 a share, and there are I million shares outstanding. (L.021-2) a. Sleepy's management is willing to accept a 12. cash offer of $25 a share. Can the merger be b. What will happen if Sleepy's management holds out for an offer of $28 Market for Corporate Control. Why are both tender offers and out for proxy contests threatening to may lead to a accomplished on a friendly basis? t of a fim What are less contentious mechanisms that lafinition or description. (LO21-4)