Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 31, Problem 12PS
Summary Introduction
To determine: The highest price Company W is willing to pay Company M shareholders.
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Gobi Desserts is bidding to take over Universal Puddings. Gobi has 3,500 shares outstanding, selling at $55 per share. Universal has 2,500 shares outstanding, selling at $22.50 a share. Gobi estimates the economic gain from the merger to be $22,500. Required:
If Universal can be acquired for $25 a share, what is the NPV of the merger to Gobi?
What will Gobi sell for when the market learns that it plans to acquire Universal for $25 a share? (Round your answer to 2 decimal places.)
What will Universal sell for? Assume that the market expects the merger to go through without any further bidding.
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e. 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.
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Acquiring Corp. is considering a takeover of Takeover Target Inc. Acquiring has 12 million shares outstanding, which sell for $20 each. Takeover Target has 6 million shares outstanding, which sell for $10 each. If the merger gains are estimated at $24 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders?
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