NBC and TMD today (11 Dec 2020) announced that they have signed a definitive agreement for NBC to acquire TMD in a cash-and-stock transaction. TMD shareholders will receive $60 per share (cash+stock) under the terms of the agreement, comprised of $33.00 per share in cash and $27.00 per share in common shares of NBC stock, based on NBC's 10 Dec 2020 closing price. The stock portion will be subject to a collar based on the "Average NBC Price" TMD shareholders will receive a number of shares equal to $22.32 in value if the Average NBC Price is below $22.32, and a number of shares equal to $28.70 in value if the Average NBC Price is above 28.70. If the Average NBC Price is greater than or equal to $22.32 but less than or equal to $28.70, TMD shareholders will receive 1 NBC share. (a) Specify what type of risk management device is embedded in the NBC-TMD deal. (2 marks) (b) Visually represent the payoff per share (total consideration per share) to this deal from the perspective of TMD shareholders as a function of NBC's share price. Clearly identify where the TMD shareholders benefit and where NBC shareholders benefit in this deal. (10 marks) (c) Assuming the market is expected to remain highly volatile due to the unsettled pandemic. From the viewpoint of TMD's shareholders, discuss whether the payment structure is effective to control price risk. (3 marks) NBC and TMD today (11 Dec 2020) announced that they have signed a definitive agreement for NBC to acquire TMD in a cash-and-stock transaction. TMD shareholders will receive $60 per share (cash+stock) under the terms of the agreement, comprised of $33.00 per share in cash and $27.00 per share in common shares of NBC stock, based on NBC's 10 Dec 2020 closing price. The stock portion will be subject to a collar based on the "Average NBC Price" TMD shareholders will receive a number of shares equal to $22.32 in value if the Average NBC Price is below $22.32, and a number of shares equal to $28.70 in value if the Average NBC Price is above 28.70. If the Average NBC Price is greater than or equal to $22.32 but less than or equal to $28.70, TMD shareholders will receive 1 NBC share. (a) Specify what type of risk management device is embedded in the NBC-TMD deal. (2 marks) (b) Visually represent the payoff per share (total consideration per share) to this deal from the perspective of TMD shareholders as a function of NBC's share price. Clearly identify where the TMD shareholders benefit and where NBC shareholders benefit in this deal. (10 marks) (c) Assuming the market is expected to remain highly volatile due to the unsettled pandemic. From the viewpoint of TMD's shareholders, discuss whether the payment structure is effective to control price risk