Question 3 Mergers and Acquisitions [15 marks] Firm T has attracted the attention of Firm A because of its poor operating performance. Firm A believes that the way Firm T is managed is inefcient and that replacing the current management team would increase the cash flow ofT by $25,BBB every year up to perpetuity. Firm T has SB,BBB shares outstanding and is not listed. Firm A has ESQBBD shares outstanding that are currently trading at $4sthare. Firm A already owns a 1% stake in Firm T. Firm T has two other shareholders, ABC and DEF. Both of them hold a 49.5% stake in Firm T. To change the management team, Firm A needs to get control of Firm T lie, at least 50% of shares]. Firm A hires Leyan Brothers, a prestigious investment bank, to get advice on the transaction. Leyan Brothers estimates that the yalue of one share of Firm T under the current management team is $15 per share. They also advise Firm A to pay a premium for the acquisition ofT and to offer ABC and DEF $1? in cash for every share of Firm T. Fees charged by Leyan Brothers to Firm A are SE,BBB. Assume that there are no taxes and markets are perfectly efficient. The appropriate annual discount rate is 10%. 1. Compute the maximum price per share that Firm A is willing to pay to acquire 99% of Firm T via an all-cash offer. {2 marks} 2. Compute ABC's gains if he accepts the all-cash offer of Slshare. {2 marks]