Questions: consider affect the value of Yahoo! stock, both on a stand-alone basis and if Yahoo! is combined with Microsoft.

(i) List the two most critical (i.e., important) assumptions that affect Yahoo!'s value to Microsoft .

(ii) Given the assumptions, what is the value of Yahoo! to Microsoft ? express the answer in terms of the total value of equity or on a per share basis.

(iii) Given the answer to part (ii), was Microsoft overbidding or underbidding for Yahoo!?Explain in one sentence.