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In Question 7 consider the following data Acquirer Target Premium Synergy Pre-deal value Debt Leverage Credit rating 630 31% BBB- 195 160 80 50% BB- 24 40 (30% of pre-deal equity) 7. Assuming that the acquirer has zero cash, estimate the leverage ratio of the acquirer if it buys the target in an all cash deal Should the acquirer pay for this deal in cash? Discuss (2 paragraphs max)

In Question 7 consider the following data Acquirer Target Premium Synergy Pre-deal value Debt Leverage Credit rating 630 31% BBB- 195 160 80 50% BB- 24 40 (30% of pre-deal equity) 7. Assuming that the acquirer has zero cash, estimate the leverage ratio of the acquirer if it buys the target in an all cash deal Should the acquirer pay for this deal in cash? Discuss (2 paragraphs max)

Essentials Of Investments
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
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In Question 7 consider the following data Pre-deal value 630 160 Acquirer Target Premium Synergy 24 40 Debt Leverage Credit rating 195 31% BBB- 80 50% BB- (30% of pre-deal equity) 7. Assuming that the acquirer has zero cash, estimate the leverage ratio of the acquirer if it buys the target in an all cash deal Should the acquirer pay for this deal in cash? Discuss (2 paragraphs max)
Transcribed Image Text:In Question 7 consider the following data Pre-deal value 630 160 Acquirer Target Premium Synergy 24 40 Debt Leverage Credit rating 195 31% BBB- 80 50% BB- (30% of pre-deal equity) 7. Assuming that the acquirer has zero cash, estimate the leverage ratio of the acquirer if it buys the target in an all cash deal Should the acquirer pay for this deal in cash? Discuss (2 paragraphs max)
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