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 Firm T 5,200 $ 52 1,100 $22 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $7,800. Firm T can be acquired for $24 per share in cash or by exchange of stock wherein B offers one of its share for every two of T's shares. Are the shareholders of Firm T better off with the cash offer or the stock offer? Cash offer is better
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 Firm T 5,200 $ 52 1,100 $22 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $7,800. Firm T can be acquired for $24 per share in cash or by exchange of stock wherein B offers one of its share for every two of T's shares. Are the shareholders of Firm T better off with the cash offer or the stock offer? Cash offer is better
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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