Questions 12..

YRL Inc. is considering the acquisition of the Target Inc. YAL has 112 million shares outstanding and the stock price is $3.89. Target has a market capitalization of $408 million and has 51 million shares outstanding. The combined entity will be worth $1.030 million.

A. If YAL issues 97 million new shares to acquire Target, what is the NPV of the acquisition to YAL?

B. What is the premium (in %) received by Target's shareholder i Part A?

C. If the synergy will be equally shared by the two groups of shareholders, what is the exchange ratio?

D. What is the maximum number of shares YAL would issue to acquire Target?