Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Question
Chapter 31, Problem 3PS
a)
Summary Introduction
To determine: Merger gain
b)
Summary Introduction
To determine: Cost of cash offer
c)
Summary Introduction
To determine: Cost of stock alternative
d)
Summary Introduction
To determine:
e)
Summary Introduction
To determine: NPV of acquisition under stock offer
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Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies as separate entities are $50 million and $25 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $650,000 per year in perpetuity. Velcro Saddles is willing to pay $27 million cash for Skiers’. The opportunity cost of capital is 10%.
a. What is the gain from the merger? (Enter your answer in millions rounded to 2 decimal places.)
b. What is the cost of the cash offer? (Enter your answer in millions.)
c. What is the NPV of the acquisition under the cash offer? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Velcro Saddles is contemplating the acquisition of Skiers Airbags Incorporated. The values of the two companies as separate entities are $46 million and $23 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $630,000 per year in perpetuity, Velcro Saddles is willing to pay $28 million cash for Skiers'. The opportunity cost of capital is 7%. What is the gain from the merger? Note: Enter your answer in millions rounded to 2 decimal places. What is the cost of the cash offer? Note: Enter your answer in millions. What is the NPV of the acquisition under the cash offer? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies as separate entities are $20 million and $10 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $500,000 per year in perpetuity. Velcro Saddles is willing to pay $14 million cash for Skiers’. The opportunity cost of capital is 8%.
a. What is the gain from the merger?
b. What is the cost of the cash offer?
c. What is the NPV of the acquisition under the cash offer?
Please answer fast i give you upvote.
Chapter 31 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 31 - Prob. 1PSCh. 31 - Prob. 2PSCh. 31 - Prob. 3PSCh. 31 - Taxation Which of the following transactions are...Ch. 31 - Prob. 5PSCh. 31 - Prob. 6PSCh. 31 - Prob. 9PSCh. 31 - Merger gains and costs Sometimes the stock price...Ch. 31 - Merger motives Suppose you obtain special...Ch. 31 - Prob. 12PS
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