1. The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $ 32 per share, and LE is trading for $65 per share, implying a pre-merger value of LE of approximately $ 8.6 billion. If the projected synergies are $1.04 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?

2. ABC has 11 million shares outstanding, each of which has a price of $23. It has made a takeover offer of XYZ Corporation which has 1 million shares outstanding, and a price per share of $ 2.43. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms.

1. Assume ABC made a cash offer to purchase XYZ for $ 3.2 million. What happens to the price of ABC and XYZ on the announcement? What premium over the current market price does this offerrepresent?
2. Assume ABC makes a stock offer with an exchange ratio of 0.14. What happens to the price of ABC and XYZ this time? What premium over the current market price does this offer represent?
3. At current market prices, both offers are offers to purchase XYZ for $3.2 Million. Does that mean that your answers to parts (a) and (b) must be identical? Explain.

3. You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company. UnderWater's stock price is $18 and it has 1.75 million shares outstanding. You believe that if you buy the company and replace its management, its value will increase by 44%. You are planning on doing a leveraged buyout of UnderWater and will offer $22.50 per share for control of the company.
   1. Assuming you get 50% control, what will happen to the price of non-tendered shares?
   2. Given the answer in part (a), will shareholders tender their shares, not tender their shares, or be indifferent?
   3. What will your gain from the transaction be?