Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, cost savings will be worth GH¢25 million today. On this basis, CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD and the gains of this transaction?

Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, cost savings will be worth GH¢25 million today. On this basis, CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD and the gains of this transaction?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 7P

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Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis, CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? What is the net present value of the transaction under the cash offer to CD?
Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, cost savings will be worth GH¢25 million today. On this basis, the CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD, what are the gains of this transaction, Suppose CD has issued 100 of its shares to its shareholders and is considering issuing 30 shares to the shareholders of AB, what is the cost of the share offer, what is the net present value of the transaction under the cash offer to CD, what is the net present value under the share offer?
Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? What is the net present value under the share offer?
Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis, CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? Suppose CD has issued 100 of its shares to its shareholders and is considering issuing 30 shares to the shareholders of AB, what is the cost of the share offer?
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There is a firm, which we have identified to buy. It has $100 million, $30 and $70 m assets, equity and debt respectively. It also has $40 m of cash. We want to buy a majority interest in the firm by using a lot of debt and as little equity as possible on our part. If we assume that there will be a 20% premium increase once we start bidding for the firm, how much should we borrow, if we can use the cash of the target itself to fund our acquisition?