Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Gobi Desserts is bidding to take over Universal Puddings. Gobi has 3,600 shares outstanding, selling at $56 per share. Universal has 2,600 shares outstanding, selling

image text in transcribed Gobi Desserts is bidding to take over Universal Puddings. Gobi has 3,600 shares outstanding, selling at $56 per share. Universal has 2,600 shares outstanding, selling at $23.50 a share. Gobi estimates the economic gain from the merger to be $24,000. Required: a. If Universal can be acquired for $26 a share, what is the NPV of the merger to Gobi? b. What will Gobi sell for when the market learns that it plans to acquire Universal for $26 a share? Note: Round your answer to 2 decimal places. c. What will Universal sell for? Assume that the market expects the merger to go through without any further bidding. d. What are the percentage gains to the shareholders of each firm? Note: Do not round intermediate calculations. Round your answers to 1 decimal place. e. Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, Gobi sells for $56, so instead of paying $26 cash, Gobi issues 0.46 of its shares for every Universal share acquired. What will be the price of the merged firm? Note: Round your answer to 2 decimal places. f. What is the NPV of the merger to Gobi when it uses an exchange of stock? Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

Was Jay Cohens conviction justified?

Answered: 1 week ago