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Chatham Foods, with 1 million shares outstanding, wishes to merge with Kent drinks with 2.5 million shares outstanding. The market prices for Chatham foods and
Chatham Foods, with 1 million shares outstanding, wishes to merge with Kent drinks with 2.5 million shares outstanding. The market prices for Chatham foods and Kent drinks are $49 and $18 respectively. The merger could create an estimated savings of $800,000 annually for the indefinite future. If Chatham foods were willing to pay $25 per share for Kent drinks and the appropriate cost of capital is 14%, What is the cost of the cash offer?
a) $62,399,883
b) $27,870,453
c) $55,319,000
d) $62,500,000 (CORRECT ANSWER)
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