Kclub has market value of 680million and Gclub has marketvalue of 170 million. Mergerresult in cost savings of, 500, 000 a year forever. Costsavings will grow at 5% a year.Kclub proposes to buy Gclub for306 million. Payment will be intwo years. Cost of capital is30%. K has 100million shareaand G has 100million shares.Find: A. Present value of mergerB. Cost to shareholders of Kclubfrom merger C. Npvmergerto Kclub shareholders
Kclub has market value of 680million and Gclub has marketvalue of 170 million. Mergerresult in cost savings of, 500, 000 a year forever. Costsavings will grow at 5% a year.Kclub proposes to buy Gclub for306 million. Payment will be intwo years. Cost of capital is30%. K has 100million shareaand G has 100million shares.Find: A. Present value of mergerB. Cost to shareholders of Kclubfrom merger C. Npvmergerto Kclub shareholders
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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Kclub has market value of 680million and Gclub has marketvalue of 170 million. Mergerresult in cost savings of, 500, 000 a year forever. Costsavings will grow at 5% a year.Kclub proposes to buy Gclub for306 million. Payment will be intwo years. Cost of capital is30%. K has 100million shareaand G has 100million shares.Find: A.
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