Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share$48 $19 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900.a.If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger?b.What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)c.If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium?d.Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)e.What is the NPV of the merger assuming the conditions in (d)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a.NPV$5,700b.Price per share$48.89c.Merger premium$3,200d.Price per share e.NPV

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19

Note : As per our guidelines, we can only answer up to 3 subparts , since you already have answers…

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19

Shares outstanding

Price per share

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter11: Venture Capital Valuation Methods

Section: Chapter Questions

Problem 1dM

See similar textbooks

Related questions

Q: Alpha is considering purchasing a competitor, Beta. Projected cash flows as a result of the merger…

A: With profit, expansion and growth is also a motive of the business. Merger is a way to expand the…

Q: Firm ABC Ltd is planning a takeover of XYZ Ltd, which operates in a different industry from ABC. The…

A: Given WACC of ABC = 10.60% WACC of XYZ = 5.20%

Q: Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition…

A: Incremental Cashflows = 1272653 Discount Rate = 14.22% Value of Teller Company = 23042111 +…

Q: GS, a computer manufacturer, announces that it will be acquiring FW Software. You know the following…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub- parts…

Q: After researching the competitors of EJH Enterprises, you determine that most comparable firms have…

A: Here, Value of Equity = EV - Debt + Cash EV = EV/EBITDA * EBITDA As per EV/EBITDA, Price of share =…

Q: For Question 1, 2, and 3, use the following information: 1.) Consider the following premerger…

A: Net Present Value(NPV) is excess of PV of inflows over PV of outflows that is discounted using WACC…

Q: Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn…

A: Increase in total after tax cash flows= $3 million Current market value of Teller Company= $48…

Q: a. According to MM Proposition I, what is the stock price for Pi Technology? b. Suppose Pi…

A: MM hypothesis 1 determines the value of firm when there are no taxes. As per this approach, when…

Q: Company A is considering acquiring Company B. Neither company has any debt. Company A expects the…

A: Given: After tax cash flow due to synergy = $2 million Company B discount rate = 10% Current market…

Q: Both of Firm A and Firm B are 100 equity firms. You estimate that the incremental value of the…

A: Incremental Value of Acquistion = $100,000 Firm B agrees = $150,000 Exchange Ratio =…

Q: 2. Caloy Co. bought 1,000 shares from Bayan Co. The shares have no active market, but an identical…

A: Fair value The value of an asset in the market is called fair value. It is the value that is…

Q: After researching the competitors of EJH Enterprises, you determine that most comparable firms have…

A: given, EPS=1.9EBITDA =$295 millioncash = $29 milliondebt = $44 millionoutstanding shares = 105…

Q: Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY…

A: 15 million Ghanaian is the cost of purchase, as it indicates the extra amount placed by the company…

Q: Gobi Desserts is bidding to take over Universal Puddings. Gobi has 3,500 shares outstanding, selling…

A: Hey, since there are multiple subparts questions posted, we will answer first three question. If you…

Q: A and B are partners in the ratio of 2:3.Thier balance sheet shows machienery at 400000,stock at…

A: Partnership is an agreement between two or more than two persons in which they invest capital, run…

Q: Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition…

A: Acquisition refers to act of purchasing of one whole business entity by another entity. In…

Q: Consider two firms, Bob Company and Cat Enterprises, both with earnings of $10 per share and 5…

A: Earnings per share(EPS) is a financial ratio that shows what portion of the profit is allocated on…

Q: Suppose Alpha Industries and Omega Technology have identical assets that generate identical cash…

A: Data given:: i) Alpha Industries is an all equity firm with 10 million equity shares outstanding…

Q: Integrity Logistic Berhad attempts to penetrate a wide logistic market segment. Therefore, it…

A: The question is related to Merger and Acquisition. The target company is infinity logistic berhad.…

Q: The owners of Arthouse Inc., a national artist supplies chain, are contemplating purchasing…

A: Financial statements are statements which states the business activities performed by the company .…

Q: Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY…

A: A merger is a contractual agreement between two or more existing business entities into a completely…

Q: Cuppy World is considering purchasing a competitor, Cupcake. Projected cash flows as a result of the…

A: Merger and acquisition is an accounting process in which two or more companies are consolidated into…

Q: on. The appropriate discounting rate for the incremental cash flows is 12%. Penn is trying to decide…

A: Part A) The cost of each alternative can be calculated as follows : Cash cost given = $94 million…

Q: Jack Pang is the financial controller of World Cruise Bhd. (World) and he is considering the…

A: Cost of acquisition is the lump sum amount of expense paid by the company to own different company…

Q: NewCo is trying to fully acquire OldCo in an all cash offer. NewCo will assume all the debt of OldCo…

A: Given, Expected Synergies from acquisition = $700 million Before acquisition no. of shares = 25…

Q: Merger Valuation with the CAPV Model Hastings Corporation is interested in acquiring Vandell…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has 1 million…

A: The corporate valuation model is one of several models used in business appraisal. It combines the…

Q: Firm A is acquiring Firm B. Firm A's share price is $6 and Firm B's share price is $3. Firm A has 3…

Q: Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm…

A: Since there are two options for the firm to carry out, either in cash offer or either through share…

Q: Diacono Ltd, is the largest listed shoe manufacturing company in Australia and is considering…

A: Answer - Part 1 - Calculation of Present Value of Gain from Acquisition - Given, Discount Rate…

Q: is date approximate their fair values. Provide the journal entry to record the transaction. Case 2 Z…

A: There are two ways in which a partner is admitted to a partnership firm. One is by investing capital…

Q: Penn Corp. is analyzing the possible acquisition of Teller Company. Both believes the acquisition…

A: Given:

Q: Firm A and Firm B are all-equity firms. Firm A has 10,000 shares outstanding at a market price of…

A: Market Price of Firm A = $25 Market Price of Frim b = $10 Stock Issued for Firm B = $82,500 Number…

Q: Hastings Corporation is interested in acquiring Visscher Corporation. Assume that the riskfreerate…

A: Given information: Risk free rate : 4% Growth rate : 7% Market risk premium : 5% Beta : 1.05…

Q: Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY…

A: Growth and profitability is the basic motive of the companies. Acquisition is s way to increase the…

Q: Penn Corporation is analyzing the possible acquisition of Teller Company. Both firms have no debt.…

A: a. Cash cost is as follows: cash cost is the cash offered to the Telle by the Pen that is $59…

Q: Firms carry out share repurchase agreements in a number of ways, including all of the following…

A: 18. Firms carry out share repurchase agreements in a number of ways, including all of the following…

Q: The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation.…

A: A company buys another company in order to take advantage of the synergy of finance, resources,…

Q: Firm ABC Ltd is planning a takeover of XYZ Ltd, whicn operates in a different industry from ABC. The…

A: Given that these are two separate questions, we will answer the first one according to Bartleby…

Q: Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn…

A: Acquisition and merger is a business combination strategy in which two different companies are…

Q: When an acquirer assesses a potential target, the price the acquirer is willing to pay should be…

A: A deal in which firm A purchases the entire firm B is known as an acquisition. In practise, if a…

Question

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding.

Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900.

a.	If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger?
b.	What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c.	If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium?
d.	Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
e.	What is the NPV of the merger assuming the conditions in (d)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)


a.	NPV	$5,700
b.	Price per share	$48.89
c.	Merger premium	$3,200
d.	Price per share
e.	NPV

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

If bank X is quoting “A $1.5838/ bid and A $1.1682/€ ask” and bank Y is quoting “A $1.1684/€ bid and A $1.1690/€ ask”. If you buy € 2million from X at it’s A $1.1682/€ ask price and simultaneously sell € 2million to Y at it’s A $ 1.1684/€ bid price. Calculate arbitrage profit.
You have been asked to assess the impact of a proposed acquisition on the beta of a firm and have been provided the following information on the two firms involved in the deal: The risk-free rate is 4% and the equity risk premium is 6%. Now assume that Acquirer plans to retire all of Target’s debt and that it will be able to buy Target’s equity at the current market price. If Acquirer would like to have a levered beta of 1.35 for the combined firm after the transaction, estimate how much new debt it will need to raise to finish this acquisition.
. GT Bank Ghana Limited quotes JPY/EUR 155-165, and GCB Bank quotes EUR/JPY0.0059-0.0063a. Are these quotes identical? b. If not, is there an opportunity for arbitrage? c. If there is an opportunity for arbitrage, how would one profit from it? 3. Given the bid-ask quotes for jpy/gbp 220-240, at what rate will:(a) Mr. Agbo purchase gbp? (b) Mr. Agbo sell gbp? (c) Mr. Debrah purchase jpy?(d) Mr. Kwaku sell jpy?
Assume the following information: Bid price of Singapore dollar Ask price of Singapore dollar Marcus Bank $0.748 $0.750 $4,000.00. $5,347.59. $2,000.00. $2,666.67. Truist Bank $0.752 $0.753 Given this information, is locational arbitrage possible? If so,compute the profit from this arbitrage if you had $1,000,000 to use.
Assume the bid rate of a Norwegian krone is $0.1042 while the ask rate is $.1094 at Bank A. Assume the bid rate of the Norwegian krone is $.0999 while the ask rate is $.1039 at Bank B. Given this information, what would be your gain if you use $2,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $2,000,000 you started with? $6,352 $5,775 $5,197 $6,064 $5,486
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
The NFF Corp. has announced plans to acquirer LE Corp. NFF is trading for $35 per share and LE is trading for $25 per share, implying a pre-merger value of LE of approximately $4 billion. If the projected synergies are $1 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?
Bank A quotes a bid rate of $0.300 and an ask rate of $0.305 for the Malaysian ringgit (MYR). Bank B quotes a bid rate of $0.306 and an ask rate of $0.310 for the ringgit. What will be the profit for an investor that has $500,000 available to conduct locational arbitrage?
The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $ 25 per share, and LE is trading for $ 29 per share, implying a pre-merger value of LE of approximately $ 7.3 billion. If the projected synergies are $ 1.27 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?
The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $50 per share, and LE is trading for $57 per share, implying a pre-merger value of LE of approximately $8.4 billion. If the projected synergies are $2.89 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?
5. Merger analysis - Free cash flow to equity (FCFE) approach Consider the following acquisition data regarding Sunny Squirrel Fabricators Inc. and Purple Turtle Corp.: Sunny Squirrel Fabricators Inc. is considering an acquisition of Purple Turtle Corp. Sunny Squirrel Fabricators Inc. estimates that acquiring Purple Turtle will result in incremental value for the firm. The analysts involved in the deal have collected the following information from the projected financial statements of the target company. Data Collected (in millions of dollars) Year 1 Year 2 Year 3 EBIT $16.0 $19.2 $24.0 Interest expense 5.0 5.5 6.0 Debt 31.9 37.7 40.6 Total net operating capital 121.5 123.9 126.3 Purple Turtle is a publicly traded company, and its market-determined pre-merger beta is 1.40. You also have the following information about the company and the projected statements. • Purple Turtle currently has an $18.00 million market value of equity and $11.70 million in debt. The risk-free rate is 3% with…
6. Merger analysis - Free cash flow to equity (FCFE) approach Consider the following acquisition data regarding Washington Company and Purple Turtle Corp.: Washington Company is considering an acquisition of Purple Turtle Corp. Washington Company estimates that acquiring Purple Turtle will result in incremental value for the firm. The analysts involved in the deal have collected the following information from the projected financial statements of the target company. Data Collected (in millions of dollars) Year 1 Year 2 Year 3 EBIT $11.0 $13.2 $16.5 Interest expense 3.0 3.3 3.6 Debt 34.1 40.3 43.4 Total net operating capital 105.1 107.1 109.1 Purple Turtle is a publicly traded company, and its market-determined pre-merger beta is 1.60. You also have the following information about the company and the projected statements. • Purple Turtle currently has a $12.00 million market value of equity and $7.80 million in debt. •The risk-free rate is 5% with a 7.10% market risk premium, and the…