Question 24 Firm A has 1,200 shares outstanding at a market price of $30 per share. Firm B has4,000 shares outstanding at a market price of $35 per share. Neither firm has any debt. Firm B isacquiring Firm A. The incremental value of the acquisition is $2,200. What is the value of Firm A toFirm B? $24,082 $38, 200 $41, 024 $43,800 $52,600

Mergers and acquisitions are done to achieve cost-effectiveness, economies of scale, more pricing…

Answered: Question 24 Firm A has 1,200 shares…

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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QUESTION 13 LEIC plc plans to acquire PEAR Plc. The timeline is as follows. Day 1- Market values for shares are LEIC Plc £12, PEAR Plc £99. Day 4 - At a private meeting, the board of LEIC Plc decides to make a bid for PEAR plc at £106 per share (to try and avoid resistance). Day 8 – LEIC plc publicly announces their offer of £106 per share on all shares. Details of the operational savings are not announced and remain confidential. What are the share prices of LEIC and PEAR on Day 8 if the market is semi-strong-form efficient? A. LEIC £12 and PEAR £99 OB. LEIC £12 and PEAR £106 C. LEIC greater than £12 and PEAR £106 D. LEIC less than £12 and PEAR £106
Firm B Firm A $ Firm AB Price Per Share Total Earnings (millions) Shares Outstanding (millions of shares) Total Value (millions) 75 $ 40 $ 300 $ 200 200 60 $ 15,000 $ 2,400 $ 20,000 Firm A has proposed to acquire Firm B at a price of $65 per share for Firm B's stock. a) What is the NPV of the merger to Firm A? What is the NPV of the merger to Firm B? b) What will be the post-merger price per share for Firm A's stock if Firm A pays in cash? c) To make the value of a stock offer equivalent to a cash offer of $3,900 million, how many shares should Firm A give to the owners of Firm B?
QUESTION 7 "Consider the situation faced by the CFO of a company with a market capitalization of $700 Millions of USD, e.g. the firm has 100 million shares outstanding, so the shares are trading at $7 per share. The CFO needs to raise $500 Millions of USDs and announces a rights issue. Each existing shareholder is sent 5 right for every share he or she owns. The CFO has not decided how many rights will be required to purchase a share of new stock. At the current price per share, what is the maximum amount of rights the CFO can require stockholders for purchasing a share of new stock and so be able to raise the $500 Millions of USDs?"
Problem 22-03 Merger Bid Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.35 (given its target capital structure). Vandell has $10.08 million in debt that trades at par and pays an 7.9% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 5% a year. Both Vandell and Hastings pay a 30% combined federal and state tax rate. The risk-free rate of interest is 7% and the market risk premium is 5%. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.4 million, $2.8 million, $3.5 million, and $3.79 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 5% rate. Hastings plans to assume Vandell’s $10.08 million in debt (which has an 7.9% interest rate) and raise additional debt…
8
@ 1 75% AT&T LTE 11:52 AM 48 Exit Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. There are no expected synergies from the transaction. Rearden will pay for Associated Steel by issuing new shares, and the exchange ratio will be such that, at current pre- announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares will Rearden have to issue? 3.6 million 8.3 million 1.2 million 4.9 million
2 3 4 5 6789E 01 10 11 RCC. Inc. has offered $870 million cash for all of the common stock in Universal Corporation. Based on recent market information, Universal is worth $730 million as an independent operation. For the merger to make economic sense for RCC, what would the minimum estimated present value of the enhancements from the merger have to be? MV as an independent operation Min. amount of synergies to justify the offer price Offer price ($m)
None
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A5 3c QRS N-Queries Company has an exciting new project that will cost $10,000,000. The company proposes to finance this project by issuing new shares with a rights offering. Currently, the company has 2,000,000 shares outstanding, each valued in the financial market at $30. With the rights offering, shareholders will be able to purchase one new share for a subscription price of $10. c. How many rights will be required to buy one new share, N?

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