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Suppose that NewOrange announced today that it has entered into a definitive agreement to acquire NeoApple. Prior to the announcement equity of company NeoApple was
Suppose that NewOrange announced today that it has entered into a definitive agreement to acquire NeoApple. Prior to the announcement equity of company NeoApple was priced at $60 per share, and normal annual equity rate of return (based on the riskiness of the companys equity) is 10%. Suppose that the investors expect that NewOrange will pay $10 premium over the current market price. What is going to happen to the share price right now? Compute the new price.
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