Tigo Ltd is contemplating the acquisition of Airtel Ltd. The present values of the two companies as separate entities are 30million and 10million respectively. Tigo estimates that by combining the two companies, it will reduce marketing and administration costs by 700,000 per year in perpetuity. Tigo can either pay 15million cash for Airtel or offer Airtel shareholders a 50% holding in Tigo. The opportunity cost of capital is 10%.

Use this question to answer Question 15 to Question 18

15. What is the gain from the merger *

16. What is the cost of the cash offer? *

17. What is the cost of the stock alternative? *

18. What is the NPV of the acquisition under the cash offer? *

19. What is its NPV under the stock offer? *

20 .Aluworks has a market value equal to its book value. Currently, the firm has excess cash of $45,000, other assets of $10,800, and equity valued at $55,800. The firm has 20,000 shares of stock outstanding and net income of $150,000. What will be the number of shares repurchased if Aluworks uses 25 percent of its excess cash to compete a stock repurchase? *

21 .MTN share price as at 1st October, 2019 was $0.73 and the outstanding shares were 24 million. Dividend of $0.05 per share was declared on 20th October, 2019 and the record date for the dividend payment was 5th November 2019. What is likely to be the total equity value of MTN as at 4th November, 2019. *