BigShark wants to acquire SmallGuppy for $206,250.00 in the form of either cash or stock. The synergy value of the deal is $30,000.00. BigShark has 30,000 shares outstanding at a price of $65.00 a share. SmallGuppy has 18,000 shares outstanding at a price of $24.00 a share. What is the NPV of acquiring SmallGuppy when stock financing is used? a) $ 253,929.57 b) $217, 184.54 c) $309, 883.91 d) $231,286.96 e) $279,427.13
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- The Dunn Corporation is planning to pay dividends of $540000. There are 270000 shares outstanding, and earnings per share are $4. The stock should sell for $48 after the ex-dividend date. If, instead of paying a dividend, the firm decides to repurchase stock,a. What should be the repurchase price? b. How many shares should be repurchased? c. What if the repurchase price is set below or above your suggested price in part a? d. If you own 100 shares, would you prefer that the company pay the dividend or repurchase stock? a. 3/10, net 45 b. 3/15 net 30 c. 3/15 net 60 d.2/10 net 45Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 13 million shares outstanding that trade for a price of $19.00 per share. Delta Technology has 23 million shares outstanding, as well as debt of $74.10 million. According to MM Proposition I, what is the stock price for Delta Technology? (Round to the nearestcent.) Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? (Round to the nearestcent.)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 4,600 1,000 Price per share $ 40 $ 14 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,800. If Firm T is willing to be acquired for $16 per share in cash, what is the NPV of the a. merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) What will the price per share of the merged firm be assuming the conditions in b. (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If Firm T is willing to be acquired for $16 per share in cash, what is the merger c. premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for…
- ABC Trading wants to raise equity to fund an acquisition of a small company (XYZ). ABC is considering two choices: (i) using an underwriting syndicate, (ii) a rights offering. The price of ABC stock is $60 and there are 250 million shares outstanding. (a) If ABC agrees to pay 3% to an underwriter to issue the stock, what are the net proceeds to the company if it sells 20 million shares to the public for $60 each?Consider two companies. Rearden Metal has earnings per share of €2, 10 million sharesoutstanding and its current stock price is €20. Associated Steel, has earnings per share of €1,25,4 million shares outstanding, and a stock price of €15Rearden Metal is thinking of buying Associated Steel and will pay for Associated Steel by issuingnew shares. Rearden Metal expects no synergies from the acquisitiorAssume that Rearden Metal offers an exchange ratio such that, at current pre-announcementshare prices for both firms, the offer represents a 20% premium to buy Associated Steel. a) Compute the price per share of the Rearden Metal that should be observed immediatelyafter the acquisition public announcement. b) Compute the price per share of the Associated Steel that should be observed immediatelyafter the acquisition public announcement.Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis, CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? Suppose CD has issued 100 of its shares to its shareholders and is considering issuing 30 shares to the shareholders of AB, what is the cost of the share offer?
- Conglomerate Inc. just announced that it plans to acquire Tiny Corp., by offering 0.75 shares of Conglomerate's stock for each share of Tiny Corp. After the announcement, Conglomerate's stock price is $10, and Tiny Corp's is $5. Assume that you have inside information that the acquisition will go through with 100% certainty. Which of the following describes a long-short portfolio that exploits this "arbitrage" opportunity, and the profits from it?(Multiple choice) A) Buy 100 Conglomerate Inc. shares, and short-sell 75 Tiny Corp. shares profit = $375 B) Buy 100 Tiny Corp. shares, and short-sell 75 Conglomerate Inc. shares profit = $250C) Buy 75 Tiny Corp. shares, and short-sell 100 Conglomerate Inc. shares profit = $1000D) Buy 100 Conglomerate Inc. shares, and short-sell 75 Tiny Corp. shares profit = $625 Please show workingSuppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 13 million shares outstanding that trade for a price of $19.00 per share. Delta Technology has 23 million shares outstanding, as well as debt of $74.10 million. Suppose Delta Technology stock currently trades for $11.25 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? If Delta Technology stock currently trades for $11.25 per share, an example of an arbitrage opportunity that exists today which requires no future cash flow obligations would be: Sell----million shares of-----at the current price of $------and buy-----million shares of---at the current price of $---and borrow $---million.(Round to two decimal places.XYZ has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. XYZ is thinking of buying ABC, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. XYZ will pay for ABC by issuing new shares. There are no expected synergies from the transaction. A) If XYZ offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy ABC, then the price per share of the combined corporation after the merger will be closest to: B) If XYZ offers cash at a price such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy ABC, then the price per share of the combined corporation after the merger will be closest to:
- Suppose Summa Industries and Cumma Technology have identical assets that generate identical cash flows. Summa Industries is an all-equity firm, with 12 million shares outstanding that trade for a price of $16.00 per share. Cumma Technology has 18 million shares outstanding, as well as debt of $57.60 million. a. According to MM Proposition I, what is the stock price for Cumma Technology? b. Suppose Cumma Technology stock currently trades for $10.74 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity?Answer need for part 3) only. Thank you! ABC Trading wants to raise equity to fund an acquisition of a small company (XYZ). ABC is considering two choices: (i) using an underwriting syndicate, (ii) a rights offering. The price of ABC stock is $60 and there are 250 million shares outstanding. 1) If ABC agrees to pay 3% to an underwriter to issue the stock, what are the net proceeds to the company if it sells 20 million shares to the public for $60 each? 2) ABC issues a rights offer to its existing stockholders that lets them purchase stock at the price of $58 each. (Note: stockholders will receive one right for each 12.5 shares they own, so only 20 million shares can be issued). What are the net proceeds to the company if it sells 20 million shares using the rights offering? 3) What is the market value of the firm in (a), (b) (ignoring information effects)?Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? What is the net present value under the share offer?
