Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 28, Problem 13P
Summary Introduction

To derive the maximum exchange ratio company NF could offer LE shareholders and still generate a positive Net Present Value, given that NF currently trades at $35 per share and LE trades at $25 per share, if the projected synergies after the merger is estimated at $1 billion. The pre-merger market capitalization of LE is $4 billion.

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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?
KT corporation has announced plans to acquire MJ corporation.  KT is trading for $45 per share and MJ is trading for $25 per share, with a premerger value for MJ of $3 billion dollars.  If the projected synergies from the merger are $750 million, what is the maximum exchange ratio that KT could offer in a stock swap and still generate a positive NPV? It is closest to: Answer choices: A) 0.75 B) 3.30 C) 2.25 D) 1.30
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