Question
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.
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 B | Firm T |
| Shares outstanding | 5,400 | 1,400 |
| Price per share | $ 47 | $ 18 |
Firm B has estimated that the value of the synergistic benefits (V) from acquiring Firm T is $9,400. Firm T is willing to be acquired for $29,400.
1. If the acquisition is made with an all cash offer, what is the NPV of the merger?
2. What will the price per share of the merged firm be under an all cash offer?
3. Suppose Firm T is agreeable to a merger by an exchange of stock. What will the price per share of the merged firm be?
4. What is the NPV of the merger under an all stock offer?
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Financial Reporting And Statement Analysis A Strategic Perspective
Authors: Clyde P. Stickney, Paul Brown
4th Edition
0030238110, 978-0030238116
