Fin_3000 problem 4
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im gojng to show you an example, just take in the methodology used, as you will do this again but with different values given for the question in the next instructions
Sure, feel free to provide the example and I'll do my best to understand the methodology used. Then, I can apply similar methodology to different values in the next instructions.
Loki, Inc. and Thor, Inc. have entered into a stock swap merger agreement whereby Loki will pay a 35
% premium over Thor's pre-merger price. If Thor's pre-merger price per share was $ 37 and Loki's was $ 52, what exchange ratio will Loki need to offer?
Question content area bottom
Part 1
To determine the exchange ratio, first compute Thor's price per share when the premium is added. Since the premium is 35 %, the compensation to Thor shareholders must be:
Compensation equals 1.35 times $ 37 equals $ 49.95
Part 2
Then, use the following formula to determine the exchange ratio:
Exchange Ratio equals StartFraction Thor's Price per Share left parenthesis with premium right parenthesis Over Loki's Price per Share EndFraction
Loki's shares are worth $ 52 and Thor's shares with the premium are $ 49.95, therefore it will need to
offer:
Exchange Ratio equals $ 49.95 divided by $ 52 equals 0.96 Part 3
The ratio should be 0.96 shares of Loki for every share of Thor. Got it. The methodology used in this example can be broken down into several steps:
Calculate the price per share for Thor after applying the 35% premium.
Determine the exchange ratio using the formula provided, which compares Thor's price per share
(with the premium) to Loki's price per share.
Now, for the next instructions, I'll use a different set of values but follow the same methodology:
Loki, Inc. and Thor, Inc. are merging again, but this time Loki will pay a 25% premium over Thor's pre-
merger price. If Thor's pre-merger price per share was $45 and Loki's was $60, what exchange ratio will Loki need to offer?
Please let me know if you need further clarification or assistance with this.
Loki, Inc. and Thor, Inc. have entered into a stock-swap merger agreement whereby Loki will pay a 26
% premium over Thor's pre-merger price. If Thor's pre-merger price per share was $ 40 and Loki's was $ 51, what exchange ratio will Loki need to offer? Question content area bottom
Part 1
The ratio should be enter your response here shares of Loki for every share of Thor. (Round to two decimal places.)
To determine the exchange ratio, first, we calculate Thor's price per share after applying the 26% premium:
Calculate the premium amount:
Premium = 26% of $40 = 0.26 * $40 = $10.40
Add the premium to Thor's pre-merger price:
Thor's price per share (with premium) = $40 + $10.40 = $50.40
Now, we can calculate the exchange ratio using the formula provided:
Exchange Ratio = Thor's Price per Share (with premium) / Loki's Price per Share
Exchange Ratio = $50.40 / $51 = 0.9882 (rounded to two decimal places)
Therefore, Loki will need to offer approximately 0.99 shares of Loki for every share of Thor.
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