A market that has three firms with the following market shares: Firm A = Firm B = Firm C = 35% 41% 24% Suppose firm B wants to acquire firm C so that the post-acquisition market would exhibit the following shares: B+C=65% A = 35% a-1. What is the pre- and postmerger HHI and the change in the HHI resulting from the merger? Premerger HHI Postmerger HHI Change in the HHI (Click to select) a-2. Based on your above calculation and according to department of Justice guidelines, is this merger likely to be challenged? Yes No
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- Consider two companies. Rearden Metal has earnings per share of €2, 10 million sharesoutstanding and its current stock price is €20. Associated Steel, has earnings per share of €1,25,4 million shares outstanding, and a stock price of €15Rearden Metal is thinking of buying Associated Steel and will pay for Associated Steel by issuingnew shares. Rearden Metal expects no synergies from the acquisitiorAssume that Rearden Metal offers an exchange ratio such that, at current pre-announcementshare prices for both firms, the offer represents a 20% premium to buy Associated Steel. a) Compute the price per share of the Rearden Metal that should be observed immediatelyafter the acquisition public announcement. b) Compute the price per share of the Associated Steel that should be observed immediatelyafter the acquisition public announcement.XYZ has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. XYZ is thinking of buying ABC, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. XYZ will pay for ABC by issuing new shares. There are no expected synergies from the transaction. A) If XYZ offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy ABC, then the price per share of the combined corporation after the merger will be closest to: B) If XYZ offers cash at a price such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy ABC, then the price per share of the combined corporation after the merger will be closest to:JJJCorporation is to be sold off by its shareholders. It currently has market values of debt and of equity at $20,000,000 and $25,000,000 respectively. The effective cost of debt is 12% while the cost of equity is 18%. Several analysts determined three potential acquirers who may be able to synergize with JJJ. The following returns from JJJ depending on the acquirer are as follows:" Acquirer Expected Firm Return G 20% H 24% I 18% Based on the above and assuming that liabilities will be retained by the entity, what is the highest selling price that the shareholders can get from the sale of JJJ?
- ) Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal 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. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. Assume Rearden offers an exchange ratio 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 Rearden needs to issue to pay for this deal? What is the exchange ratio? What will be the price per share of the combined corporation after the merger? What will be the price per share of the Rearden immediately after the announcement? What will be the price per share of the Associated Steel immediately after the announcement? What is the actual premium Rearden will pay? Is this an accretive or dilutive deal?…Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal 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. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. Assume Rearden offers an exchange ratio 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 Rearden needs to issue to pay for this deal? What is the exchange ratio? What will be the price per share of the combined corporation after the merger? What will be the price per share of the Rearden immediately after the announcement? What will be the price per share of the Associated Steel immediately after the announcement? What is the actual premium Rearden will pay? Is this an accretive or dilutive deal? Compare…Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal 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. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If Rearden offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel, then the price per share of the combined corporation after the merger will be closest to: Answer choices: A) $17.20 B) $26.00 C) $20.00 D) $19.12
- Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal 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. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction.If Rearden offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel, then Rearden's earnings per share after the merger will be closest to: $1.84. $1.90. $2.00. $2.25.#2: XYZ Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. b) What will the company's EPS and P/E ratio be under the two different scenarios?Suppose that the last sale of Company X stock was at a price of $50. Further suppose that an investor wishes to place a market order to purchase 25,000 shares of Company X stock. What is the volume weighted average price that the investor will trade at in each of the market? What if the investor purchase 120,000 shares instead 25,000? Market Depth - Market A vs B Market AMarket B#SharesOffer ($)#SharesOffer ($)30,00050.0010,00050.0040,00050.0210,00050.0110,00050.0570,00050.0320,00050.0680,00050.0430,00050.0760,00050.0510,00050.0940,00050.05
- 35. Edwin, an investor, identifies an arbitraging opportunity on the shares of Tristan Group [buying in market A and selling in market B] and he can afford to trade 1,000 shares. The price levels and the transaction costs are as follows: Market A $35.00 per share Market B $35.50 per share Commission charges + Other Costs $25.00 per batch of 100 shares Based solely on the information given, which of the following observations is most likely true of the market? a. The market is highly inefficient because the investor can earn $500 by arbitraging. b. The market is inefficient because the investor can earn a profit by arbitraging. c. The market is efficient within the bounds of arbitrage as the investor can earn only $250 by arbitraging. d. It cannot be determined from the data given whether the market is efficient or inefficient. e. The market is efficient because the investor cannot earn a profit by arbitraging.The firm can sell 8% preferred stock at its R80 per share par value. Assume that the par value represents the price. The cost of issuing and selling the preferred stock is expected to be R7 per share. Firm is in 40% tax bracket. Determine the cost of preferred stock.Ewing Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000 would be spent. Current earnings are $3 per share, and the stock currently sells for $50 per share. There are 5,000 shares outstanding. Ignore taxes and other market imperfections (e.g. transaction cost) in answering the questions. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. b) What will be the effect on Ewing’s EPS and PE ratio under the two different scenarios?