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. Shares outstanding Price per share Firm B 4,600 Firm T 1,000 $ 40 $ 14 5 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,800. a. If Firm T is willing to be acquired for $16 per share in cash, what is the NPV of the merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) 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 $16 per share in cash, what is the merger premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) 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 decimal places, e.g., 32.16.) e. What is the NPV of the merger assuming the conditions in (d)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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. Shares outstanding Price per share Firm B 4,600 Firm T 1,000 $ 40 $ 14 5 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,800. a. If Firm T is willing to be acquired for $16 per share in cash, what is the NPV of the merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) 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 $16 per share in cash, what is the merger premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) 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 decimal places, e.g., 32.16.) e. What is the NPV of the merger assuming the conditions in (d)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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.
Shares outstanding
Price per share
Firm B
4,600
Firm T
1,000
$ 40
$ 14
5
Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is
$8,800.
a. If Firm T is willing to be acquired for $16 per share in cash, what is the NPV of the
merger? (Do not round intermediate calculations and round your answer to the
nearest whole number, e.g., 32.)
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 $16 per share in cash, what is the merger
premium? (Do not round intermediate calculations and round your answer to the
nearest whole number, e.g., 32.)
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 decimal
places, e.g., 32.16.)
e. What is the NPV of the merger assuming the conditions in (d)? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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