a) The market values of Alpha Corporation and Gamma Corporation are $2,500 and$900, respectively. Assume Alpha acquires Gamma at a cost of $1,000 and thetransaction creates $100 in synergy. What would be the NPV of this acquisition toAlpha?b) Principal is acquiring Secondary Companies for $38,000 in cash. Principal has 4,500shares of stock outstanding at a market price of $31 per share. Secondary has 1,600shares of stock outstanding at a market price of $22 per share. Neither firm has anydebt. The net present value of the acquisition is $2,400. What is the price per shareof Principal after the acquisition?

Hi student Since there are multiple questions, we will answer only first question. Merger is one of…

Answered: a) The market values of Alpha…

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

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Principal, Inc. is acquiring Secondary Companies for $29 million in cash. Principal has 2.5 million shares of stock outstanding at a market price of $30 a share. Secondary has 1.6 million shares of stock outstanding at a market price of $15 a share. Neither firm has any debt. The synergy gains of the acquisition is $4.5 million. What is the NPV of the acquisition?
Veghie Co is acquiring Fruit Inc for $25,250 in cash. Veggie Co has 2350 shares outstanding at a market price per share of $39. Fruits Inc 1500 shares outstanding at $16 per share. Neither firm has outstanding debt. The incremental value (synergy) of the acquisition is $2300. What is the value of Veggie Co after acquisition? A) 92,700 B) 88,950 C) 56,650 D) 89,150 E) 73,750
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You're given the following details of an acquisition of Target Co. by Acquirer Ltd.. What is the transaction value for this acquisition of Target Co.? Acquisition of Target Co. by Acquirer Ltd. Target Share Price ($/sh.) $85.40 Acquisition Premium 15% Diluted Shares Outstanding (MM) 670 Target Total Debt $3,562 Target Cash and Cash Equivalents $5,147 % Debt Financing 40% % Equity Financing 60% Equity Financing Fees 4.0% Debt Financing Fees 1.5% Other Transaction Costs $800
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b) Principal is acquiring Secondary Companies for $38,000 in cash. Principal has 4,500 shares of stock outstanding at a market price of $31 per share. Secondary has 1,600 shares of stock outstanding at a market price of $22 per share. Neither firm has any debt. The net present value of the acquisition is $2,400. What is the price per share of Principal after the acquisition?
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a) The market values of Alpha Corporation and Gamma Corporation are $2,500 and $900, respectively. Assume Alpha acquires Gamma at a cost of $1,000 and the transaction creates $100 in synergy. What would be the NPV of this acquisition to Alpha?