Question
Company A has a market value of $200 million and two million shares outstanding. Company B has a market value of $50 million and one
Company A has a market value of $200 million and two million shares outstanding. Company B has a market value of $50 million and one million shares outstanding. Company A is deciding to acquire Company B. The managers of Company A have determined that the value of the combined firms will be $300 million. Company A expects to pay a $30 million premium for Company B. Assume that capital markets are efficient and that there is a 100 percent probability the deal will be closed. What is the NPV of the acquirer (Company A)?
- $30 million
- $20 million
- $300 million
- $100 million
- $50 million
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals of Database Systems
Authors: Ramez Elmasri, Shamkant Navathe
6th edition
136086209, 978-0136086208
