Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You own 10,000 shares of a company currently trading at $35. The company has received multiple tender offers from different companies to take over the

You own 10,000 shares of a company currently trading at $35. The company has received multiple tender offers from different companies to take over the company. The following are the details:

Company A is your competitor. It has offered price of $45 per share. Its plan is to kill your brand after the company is bought. The manufacturing facilities will continue to function as before but the product will be sold under company A's brand. The headquarters will be sold and existing management will be fired.

Company B is in unrelated business. It has offered $44 per share. Company B plans to maintain the business as is. It has promised to keep all the existing employees for a minimum period of 3 years. Some marketing functions will be merged with company B's existing department. Even after 3 years the company has promised to keep producing in the USA. It will not outsource its manufacturing to any other country.

Company C is a vulture capitalist firm. It is in the business of identifying poorly performing companies. It fires existing management, breaks the company into pieces and sells different assets to highest bidder to make profit. Company C has offered $45.10 per share.

Which offer would you recommend be accepted and why? Be advised that you are not a manager or a board member in the firm.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quantitative Investment Analysis

Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle

3rd edition

111910422X, 978-1119104544, 1119104548, 978-1119104223

More Books

Students also viewed these Finance questions