Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 28, Problem 12P
Summary Introduction

To derive the share exchange ratio to be offered, given that LI and TI have entered into a stock swap agreement, whereby LI will pay a 40% premium over TI’s pre-merger price. The pre-merger price per share of TI was $40 and the pre-merger price per share of LI was $50.

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The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $50 per share, and LE is trading for $57 per share, implying a pre-merger value of LE of approximately $8.4 billion. If the projected synergies are $2.89 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?
The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $ 25 per​ share, and LE is trading for $ 29 per​ share, implying a​ pre-merger value of LE of approximately $ 7.3 billion. If the projected synergies are $ 1.27 ​billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive​ NPV?
The NFF Corp. has announced plans to acquirer LE Corp. NFF is trading for $35 per share and LE is trading for $25 per share, implying a pre-merger value of LE of approximately $4 billion. If the projected synergies are $1 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?
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