Company ACQ is planning to acquire Company TAR. ACQ currently has 1,800 shares outstanding and a share
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Company ACQ is planning to acquire Company TAR. ACQ currently has 1,800 shares outstanding and a share price of $52. TAR has 1,300 shares outstanding and a share price of $40. The synergy of the acquisition is estimated to be $13,000.
(a) Calculate the cost of acquisition if TAR agrees to a cash offer of $28 per share. (Show your calculations).
(b) What exchange ratio between the 2 stocks would make the actual cost of the stock offer identical to the cost of the cash offer of $15? (Show your calculations).
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