Chicago Savings Corp. is planning to make an offer for Ernie's Bank & Trust. The stock of Ernie's Bank & Trust is currently selling for$40 a share.a. If the tender offer is planned at a premium of 40 percent over market price, what will be the value offered per share for Ernie's Bank& Trust? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)Value offered per shareb. Suppose before the offer is actually announced, the stock price of Ernie's Bank & Trust goes to $50 because of strong mergerrumors. If you buy the stock at that price and the merger goes through (at the price computed in part a), what will be your percentagegain? (Do not round intermediate calculations. Input the amount as a positive percent value rounded to 2 decimal places.)Percentage gainc. Because there is always the possibility that the merger could be called off after it is announced, you also want to consider yourpercentage loss if that happens. Assume you buy the stock at $50 and it falls back to its original value after the merger cancellation.What will be your percentage loss? (Do not round intermediate calculations. Input answer as a positive value. Input your answer asa percent rounded to 2 decimal places.)Percentage lossd. There is an 80 percent probability that the merger will go through when you buy the stock at $50, and only a 20 percent chancethat it will be called off.d-1. Compute the expected value of the return on the investment. Assume the time period involved is short. (Do not roundintermediate calculations. Input your answer as a percent rounded to 2 decimal places.)Expected value of returnd-2. Does this appear to be a good investment?YesO No%

Shares are units of equity ownership in a corporation. Generally there are two types of Shares 1.…

Answered: a. If the tender offer is planned at a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

(a) Describe what it means if a new company decides to issue its ordinary shares to investors in instalments, and why they might sell shares this way. (b) John’s Building Company needs to raise $100,000 cash from share investors and asks for your advice for designing the sale of the shares. He wants to sell ordinary shares. First, use your imagination to determine a reasonable sale price per share. Then, design a traditional 3 step instalment plan for collection of the cash from investors. Hint: you may consider that the Application period will commence on 1st February 2022. Outline the basic details of your plan, including beginning and ending dates for each stage of your plan.
You are bearish on Telecom and decide to sell short 100 shares at the current market price of $44 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reaches
KT corporation has announced plans to acquire MJ corporation. KT is trading for $45 per share and MJ is trading for $25 per share, with a premerger value for MJ of $3 billion dollars. If the projected synergies from the merger are $750 million, what is the maximum exchange ratio that KT could offer in a stock swap and still generate a positive NPV? It is closest to: Answer choices: A) 0.75 B) 3.30 C) 2.25 D) 1.30
Your company has earnings per share of $3. It has 1 million shares outstanding, each of which has a price of $38. You are thinking of buying TargetCo, which has earnings of $3 per share, 1 million shares outstanding, and a price per share of $25. You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction. Suppose you offered an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 15% premium to buy TargetCo. However, the actual premium that your company will pay for TargetCo when it completes the transaction will not be 15%, because on the announcement the target price will go up and your price will go down to reflect the fact that you are willing to pay a premium for TargetCo without any synergies. Assume that the takeover will occur with certainty and all market participants know this on the announcement of the takeover (ignore time value of money). a. What is the price per share of the…
Suppose you think company Y’s share is going to appreciate substantially in value next year. The current share of company Y is $150. One call option of this company’s share expiring in one year is currently available at $15 with an exercise price of $150. With $150,000 to invest, you are considering three investment strategies: a. Invest all $150,000 b. Invest all $150,000 in options c. Buy 5,000 options and invest the remaining amount in treasury bills paying 5% annually What is the value of your portfolio and your rate of return for each strategy for the following share prices one year from now? Summarise your results in a table and draw a graph showing return for each alternative (Hint: show return on Y axis and share price on X axis). Share prices $130, $140, $150, $160 and $170
You believe that Rose, Incorporated, stock is going to fall and you've decided to sell 900 shares short. If the current share price is $52, construct the equity account balance sheet for this trade. Assume the initial margin is 65 percent. Note: Do not round intermediate calculations. Input all amounts as positive values. Assets Proceeds from sale Initial margin deposit Total Liabilities and account equity Short position Account equity Total
In the above example, suppose the firm had paid $80 per share when buying back shares with its $100 in cash. (Assume that the firm can buy back fractional shares.) In this and the following two questions, fill in the blanks in the table below. Cash Other assets Total market value of stock Shares Share price Do not use $ sign. Answer to nearest whole number. The missing value for a is: Before buyback $100 $400 $500 10 $50 After buyback 0 $400 a b C
Hassinah, Incorporated, is proposing a rights offering. Presently, there are 800,000 shares outstanding at $48 each. There will be 160,000 new shares offered at $40 each. a. What is the new market value of the company? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. How many rights are associated with one of the new shares? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. What is the ex-rights price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the value of a right? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. New market value b. Number of rights needed c. Ex-rights price d. Value of a right
In you cash account, you buy 100 shares of XYZ Corporation at a price of $10 per share. Two months later, XYZ pays a dividend $0.21 per share. You sell all 100 shares of XYZ three months later at a price of $12 per share. If you wanted to lever up the returns of this trade, you could have executed it in your _____ account. A) cash B) margin C) brokerage D) bank
You are bearish on Telecom and decide to sell short 100 shares at the current market price of $36 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reaches
Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900. a. If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger? b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium? d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2…
1) Andy is bearish on USL and decides to sell short 20, 000 shares at the current market price of $120 per shar e. The initial margin is 50%. The margin account pays n o interest. Three days later, the price of USL has risen t o $130. a. What is the remaining margin in the account? b. If the maintenance margin is 30%, will Andy receive a margin call? c. Calculate the rate of return on the short position.

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS