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Lightning corporation (LNT) announced plans to acquire the Elektron corporation (ELK). LNTs stock is trading at $40 per share, while ELKs stock is trading at
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Lightning corporation (LNT) announced plans to acquire the Elektron corporation (ELK). LNTs stock is trading at $40 per share, while ELKs stock is trading at $20 per share, implying a pre-merger value for ELK of $4 billion. If the projected synergies S for LNTs acquisition of ELK amount to $8 billion, what is the maximum exchange ratio x (in terms of shares of LNT for shares of ELK) that LNT would offer in a stock swap and still generate a positive NPV?
a. 1.50
b. 1.00
c. 0.75
d. 0.25
Lightning corporation (LNT) announced plans to acquire the Elektron corporation (ELK). LNTs stock is trading at $40 per share, while ELKs stock is trading at $20 per share, implying a pre-merger value for ELK of $4 billion. If the projected synergies S for LNTs acquisition of ELK amount to $8 billion, what is the maximum exchange ratio x (in terms of shares of LNT for shares of ELK) that LNT would offer in a stock swap and still generate a positive NPV?
| a. | 1.50 | |
| b. | 1.00 | |
| c. | 0.75 | |
| d. | 0.25 |
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