his investment to be 10 percent. What is the benefit of the merger to the shareholders of The Carlson Card Gallery? Calculate the present value of the synergy of this merger. Estimate if any the benefit of the merger to the shareholders of Stanley Limited. Should the merger take place?
his investment to be 10 percent. What is the benefit of the merger to the shareholders of The Carlson Card Gallery? Calculate the present value of the synergy of this merger. Estimate if any the benefit of the merger to the shareholders of Stanley Limited. Should the merger take place?
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 7P
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The Stanley Shoppe Limited (SSL) wishes to acquire The Carlson Card Gallery for $400,000. The Carlson Card Gallery has 50,000 stocks outstanding which are currently quoted at $7 per share. Stanley expects the merger to provide incremental earnings of about $67,000 a year for 10 years. Ken Stanley, the CEO of SSL, has calculated the marginal cost of capital for this investment to be 10 percent.
- What is the benefit of the merger to the shareholders of The Carlson Card Gallery?
- Calculate the present value of the synergy of this merger.
- Estimate if any the benefit of the merger to the shareholders of Stanley Limited.
- Should the merger take place?
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