Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help with this question! Gobi Desserts is bidding to take over Universal Puddings. Gobi has 5,000 shares outstanding, selling at $70 per share. Universal

Please help with this question!

image text in transcribed

Gobi Desserts is bidding to take over Universal Puddings. Gobi has 5,000 shares outstanding, selling at $70 per share. Universal has 4,000 shares outstanding, selling at $37.50 a share. Gobi estimates the economic gain from the merger to be $45,000. Required: a. If Universal can be acquired for $40 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 $40 a share? (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? (Do not round Intermediate calculations. Round your answers to 1 decimal place.) 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 $70, so instead of paying $40 cash, Gobi Issues 0.57 of its shares for every Universal share acquired. What will be the price of the merged firm? (Round your answer to 2 decimal places.) f. What is the NPV of the merger to Gobl when It uses exchange of stock? (Do not round Intermediate calculations. Round your final answer to nearest whole dollar amount.) a. NPV b New Price c. d. 9% New Price % gain to A % gain to B Price of merged firm NPV e. f

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

Step: 3

blur-text-image

Ace Your Homework with AI

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

Get Started

Recommended Textbook for

Online Auditing Tool Towards A Generic Approach To Audit Business Processes Of An Information System On The Fly

Authors: Bhawna Mallic, Kopal Gakkhar

1st Edition

3838395115, 978-3838395111

More Books

Students also viewed these Accounting questions