Bartlies Co is considering whether to acquire Indigo Inc. The values of the two companies as separate entities are $28 million and $14 million, respectively, Bartlies Co estimates that by combining the two companies, it will reduce costs by $540.000 per year in perpetuity. Bartlies considers offering Indigo Inc's shareholders a 50% holding in Bartlies Co. The opportunity cost of capital is 10%. a. What is the value of the stock in the merged company held by the original Indigo Inc's shareholders? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Value of the stock million 00-42:24 b. What is the cost of the stock alternative? (Do not round intermediate calculations).
Bartlies Co is considering whether to acquire Indigo Inc. The values of the two companies as separate entities are $28 million and $14 million, respectively, Bartlies Co estimates that by combining the two companies, it will reduce costs by $540.000 per year in perpetuity. Bartlies considers offering Indigo Inc's shareholders a 50% holding in Bartlies Co. The
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