As a corporate finance analyst specializing in M&A deals, you are given the following pre-merger information aboutJupiter, the bidding firm and Venus, the target firm. Assume that both firms have no debt outstanding.JupiterVenus4,1001,800$18Shares outstandingPrice per share$43Jupiter has estimated that the value of the synergistic benefits from acquiring Venus is $6,000.i) If Venus is willing to be acquired for $20.50 per share in cash, compute the NPV of the merger.ii) Calculate the price per share of the merged firm based on your answer in part (i).iii) Suppose Venus is agreeable to a merger by an exchange of stock. If Jupiter offers one of its shares for every two ofVenus's shares, compute what will the price per share of the merged firm be?iv) Based on your answer in part (iii), calculate the NPV of the merger.v) Explain which financing method (cash or stock exchange) is more attractive for Venus's shareholders.

NPV of merger is the net benefits due to merger of the firm and the difference between the value…

Answered: Jupiter, the bidding firm and Venus,…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Firm B Firm A $ Firm AB Price Per Share Total Earnings (millions) Shares Outstanding (millions of shares) Total Value (millions) 75 $ 40 $ 300 $ 200 200 60 $ 15,000 $ 2,400 $ 20,000 Firm A has proposed to acquire Firm B at a price of $65 per share for Firm B's stock. a) What is the NPV of the merger to Firm A? What is the NPV of the merger to Firm B? b) What will be the post-merger price per share for Firm A's stock if Firm A pays in cash? c) To make the value of a stock offer equivalent to a cash offer of $3,900 million, how many shares should Firm A give to the owners of Firm B?
Consider the following information about Firm A and Firm T: Item Firm A (Acquiring firm) Firm T (Target firm) Price per share $20 $15 Outstanding shares 50 25 Total market value $1000.00 $375 Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium? Select one: a. $150.00 b. $135.00 c. $125.00 d. $175.00
4. The following table shows pre-merger data for ABC Company and XYZ, Inc. ABC XYZ No of share outstanding 2,000,000 5,000,000 EPS $2.50 $4.00 Price per share $15.00 $60 a) Assume XYZ is taking over ABC by issuing one of its shares for four shares of ABC. If there is no synergy, what would be the post-merger share price of XYZ? What would be the NPV of the merger? b) Assume there is synergy value of $4,200,000 created from the merger. What would be the post-merger price per share of XYZ? What would be the NPV of the merger? 5. Lazos Company is in distress mainly due to its failure to adopt the current technology. Creditors took Lazos to bankruptcy court and Lazos is fighting for a reorganization. The following is its condensed balance sheet. Book Value Market Value Current assets $ 120,000.00 $ 100,000.00 Machinery 200,000.00 150,000.00 Other fixed…
T/F The npv of a merger equals the total value of the acquired firm minus the synergies created by the merger.
Company A is considering the acquisition of Company B, and intends to finance this potential acquisition using only retained cash. Consider the information in Table 2 about Companies A and B, expected synergies from the acquisition and price asked by Company B's shareholders to sell their company. Table 2 A Current market value (€) 700 420 Number of shares 100 40 Expected synergies from acquisition (€) 80 Value asked by Company B's shareholders (€ ) 560 To answer the following questions make plausible assumptions if necessary. a. What is the expected combined value after acquisition? Explain your answer. b. Should A acquire B by €560? Explain your answer. c. Consider the scenario where Company A decides to finance the acquisition with equity instead of cash. What would be the optimal exchange ratio of Company Av ersus Company B shares? Explain your answer.
KT corporation has announced plans to acquire MJ corporation. KT is trading for $45 per share and MJ is trading for $25 per share, with a premerger value for MJ of $3 billion dollars. If the projected synergies from the merger are $750 million, what is the maximum exchange ratio that KT could offer in a stock swap and still generate a positive NPV? It is closest to: Answer choices: A) 0.75 B) 3.30 C) 2.25 D) 1.30
Kk.415.
As an analyst of Firm A, you are investigating the possible acquisition of Firm T. You estimate that investors currently expect a 6% growth in A's earnings and dividends. Under new management this growth rate would be increased to 8%, without any additional capital investment. You are considering a stock swap merger. What is the maximum exchange ratio that you can afford? EPS Dividend/Share Number of Shares Stock Price Firm A $5 $3 1000000 $90 Firm T $1.5 $0.8 600000 $20
Acquiring Corporation is considering a takeover of Takeover Target Incorporated. Acquiring has 16 million shares outstanding, which sell for $30 each. Takeover Target has 8 million shares outstanding, which sell for $23 each. If the merger gains are estimated at $40 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders? Highest price per share
A and B are merged. A is the acquiring firm, B is the acquired firm. The recorded value of B’s assets is 300.000.000 TL, liabilities of B is 140.000.000 TL. A paid 200.000.000 TL to merge with B. How much is the goodwill? Select one: 160.000 240.000 40.000 440.000.
Vijay
Examine the following table. Which merger would create the largest increase in the HHI? Total Revenues Firm ($ millions) Firm A 392 Firm B 343 Firm C 297 Firm D 200 Firm E 160 Firms F- M 208 Total 1,600 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A and B A and M Land M K, L, and M e Any merger among the top four firms would change HHI equally

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