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Sweet Cola Corporation ( SCC ) is bidding to take over Salty Dog Pretzels ( SDP ) . SCC has 2 , 5 0 0
Sweet Cola Corporation SCC is bidding to take over Salty Dog Pretzels SDP SCC has shares outstanding, selling at $ per
share. SDP has shares outstanding, selling at $ a share. SCC estimates the economic gain from the merger to be $
a If SDP can be acquired for $ a share, what is the NPV of the merger to SCC
b What will SCC sell for, pershare, when the market learns that it plans to acquire SDP for $ a share?
Note: Do not round intermediate calculations. Round your answer to decimal places.
c What will SDP sell for, per share, if the market learns about the acquisition?
d What are the percentage gains to the shareholders of each firm?
Note: Do not round intermediate calculations. Enter your answers as a percent rounded to decimal places.
e Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, SCC
sells for $ so instead of paying $ cash, SCC issues of its shares for every SDP share acquired. What will be the price
of the merged firm?
Note: Do not round intermediate calculations. Round your answer to decimal places.
f What is the NPV of the merger to SCC when it uses an exchange of stock?
Note: Do not round intermediate calculations. Round your answer to decimal places.
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