Question 2 Optimust Berhad (Optimust) is a manufacturing company. It is currently considering taking over another company, known as Bumblebeet Berhad (Bumblebeet). The board of directors of Optimust Berhad intends to make a bid soon and has now approached you to assist them to ascertain a value on Bumblebeet. You are given the following information: Optimust Bumblebeet Number of ordinary shares in issue 5 million 1 million Price per share RM5 RM3 Both Optimust and Bumblebeet are 100% owned by their shareholders. Optimust estimates that the value of the synergistic benefit from acquiring Bumblebeet is RM300,000. Optimust is evaluating two possible options as follows: i. To pay RM2.50 in cash for every share of Bumblebeet ii. To offer its 5% of unit shares in issue to Bumblebeet's shareholders From the above information you are required to: a. Calculate the value of Bumblebeet to Optimust. b. Determine the Net Present Value (NPV) for each option. c. Based on the NPV (in part b), choose the best option for Optimust. Interpret your findings to Optimust.
Question 2 Optimust Berhad (Optimust) is a manufacturing company. It is currently considering taking over another company, known as Bumblebeet Berhad (Bumblebeet). The board of directors of Optimust Berhad intends to make a bid soon and has now approached you to assist them to ascertain a value on Bumblebeet. You are given the following information: Optimust Bumblebeet Number of ordinary shares in issue 5 million 1 million Price per share RM5 RM3 Both Optimust and Bumblebeet are 100% owned by their shareholders. Optimust estimates that the value of the synergistic benefit from acquiring Bumblebeet is RM300,000. Optimust is evaluating two possible options as follows: i. To pay RM2.50 in cash for every share of Bumblebeet ii. To offer its 5% of unit shares in issue to Bumblebeet's shareholders From the above information you are required to: a. Calculate the value of Bumblebeet to Optimust. b. Determine the Net Present Value (NPV) for each option. c. Based on the NPV (in part b), choose the best option for Optimust. Interpret your findings to Optimust.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 2
Optimust Berhad (Optimust) is a manufacturing company. It is currently considering taking over
another company, known as Bumblebeet Berhad (Bumblebeet). The board of directors of
Optimust Berhad intends to make a bid soon and has now approached you to assist them to
ascertain a value on Bumblebeet. You are given the following information:
Optimust Bumblebeet
Number of ordinary shares in issue 5 million 1 million
Price per share
RM5
RM3
Both Optimust and Bumblebeet are 100% owned by their shareholders. Optimust estimates that
the value of the synergistic benefit from acquiring Bumblebeet is RM300,000.
Optimust is evaluating two possible options as follows:
i. To pay RM2.50 in cash for every share of Bumblebeet
ii. To offer its 5% of unit shares in issue to Bumblebeet's shareholders
From the above information you are required to:
a. Calculate the value of Bumblebeet to Optimust.
b. Determine the Net Present Value (NPV) for each option.
c. Based on the NPV (in part b), choose the best option for Optimust. Interpret your findings to
Optimust.
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