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Consider the following premerger information about a bidding firm ( Firm B ) and a target firm ( Firm T ) . Assume that both
Consider the following premerger information about a bidding firm Firm B and a target
firm Firm T Assume that both firms have no debt outstanding.
Firm has estimated that the value of the synergistic benefits from acquiring Firm is
$ Firm can be acquired for $ per share in cash or by exchange of stock
wherein B offers one of its share for every two of Ts shares.
a Are the shareholders of Firm T better off with the cash offer or the stock offer?
b At what exchange ratio of shares to shares would the shareholders in be
indifferent between the two offers? Do not round intermediate calculations and
round your answer to decimal places, eg
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