Corporate Finance, Student Value Edition (4th Edition)
4th Edition
ISBN: 9780134101446
Author: Berk, Jonathan; DeMarzo, Peter
Publisher: PEARSON
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Question
Chapter 28, Problem 12P
Summary Introduction
To derive the share exchange ratio to be offered, given that LI and TI have entered into a stock swap agreement, whereby LI will pay a 40% premium over TI’s pre-merger price. The pre-merger price per share of TI was $40 and the pre-merger price per share of LI was $50.
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Taggart Transcontinental and Phoenix-Durango have entered into a stock swap merger agreement whereby Taggart will pay a 30% premium over Phoenix-Durango's premerger price. If Taggart's premerger price per share was $15 and Phoenix-Durango's was $30, then the exchange ratio that Taggart will offer is closest to:
Answer choices:
A) 2.6:1
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D) 0.4:1
Loki, Inc. and Thor, Inc. have entered into a stock-swap merger agreement whereby Loki will pay a 39% premium over Thor's pre-merger price. If Thor's pre-merger price per share was $42 and Loki's was $51, what exchange ratio will Loki need to offer?
a. 1.42 shares of Loki for each share of Thor
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c. 0.86 shares of Loki for each share of Thor
d. 1.14 shares of Loki for each share of Thor
Finance
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.
A. If Thor’s pre-merger price per share was $37 and Loki’s was $52, what exchange ratio will Loki need to offer?
B. On the day of the merger announcement, the increase in Thor (the target firm’s) stock price will be ______(higher/lower) than 35% (the takeover premium).
C. Based on your answer in part B of this question, explain why you think Thor’s stock price increase will be higher or lower than the takeover premium at the time of the merger announcement.
Chapter 28 Solutions
Corporate Finance, Student Value Edition (4th Edition)
Ch. 28.1 - Prob. 1CCCh. 28.1 - Prob. 2CCCh. 28.2 - On average, what happens to the target share price...Ch. 28.2 - Prob. 2CCCh. 28.3 - What are the reasons most often cited for a...Ch. 28.3 - Prob. 2CCCh. 28.4 - Prob. 1CCCh. 28.4 - What do risk arbitrageurs do?Ch. 28.5 - Prob. 1CCCh. 28.5 - Prob. 2CC
Ch. 28.6 - Prob. 1CCCh. 28.6 - Prob. 2CCCh. 28 - What are the two primary mechanisms under which...Ch. 28 - Prob. 2PCh. 28 - What are some reasons why a horizontal merger...Ch. 28 - Prob. 4PCh. 28 - Prob. 5PCh. 28 - Prob. 6PCh. 28 - How do the carryforward and carryback provisions...Ch. 28 - Diversification is good for shareholders. So why...Ch. 28 - Your company has earnings per share of 4. It has 1...Ch. 28 - If companies in the same industry as TargetCo...Ch. 28 - Prob. 11PCh. 28 - Prob. 12PCh. 28 - Prob. 13PCh. 28 - Lets reconsider part (b) of Problem 99. The actual...Ch. 28 - ABC has 1 million shares outstanding, each of...Ch. 28 - Prob. 16PCh. 28 - How does a toehold help overcome the free rider...Ch. 28 - Prob. 18P
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