QUESTION C2Macro PLC current has 1 million shares outstanding, with a market value of£30 per share. Macro is expected to pay a dividend of £3 per share next yearand the dividends are expected to grow constantly at 5% a year.Macro PLC is approaching Micro PLC for a potential acquisition. Macro ismaking an offer to acquire the whole of Micro's 500 thousand shares, whichare currently valued at £4 on the market.Micro PLC is expected to pay a dividend of £1 per share in a year's time andthe dividends are expected to grow at 4% for a foreseeable future.The expectation is that if the acquisition is successful, the merged companywill be able to deliver a better dividend growth rate of 8%.Required:a. Estimate the gain of the acquisition if it goes ahead.b. How much is the cost of the acquisition under the current £6 cashpayment offer?c. Critically discuss at least three sensible motives for mergers andacquisitions.

An acquisition refers to the purchase of controlling interest by one company in the share capital of…

Answered: nas share a market value RISıno £30 per…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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