Question
In: Finance
ABC has 1 million shares outstanding, each of which has a price of $ 22. It...
ABC has 1 million shares outstanding, each of which has a price of $ 22. It has made a takeover offer of XYZ Corporation which has 1 million shares outstanding, and a price per share of $ 2.58. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms.
a. Assume ABC made a cash offer to purchase XYZ for $ 3.8 million. What happens to the price of ABC and XYZ on the announcement? What premium over the current market price does this offer represent?
b. Assume ABC makes a stock offer with an exchange ratio of 0.14. What happens to the price of ABC and XYZ this time? What premium over the current market price does this offer represent?
c. At current market prices, both offers are offers to purchase XYZ for $ 3.8 million. Does that mean that your answers to parts (a) and (b) must be identical? Explain.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
ABC has 1 million shares outstanding, each of which has a price of $ 23. It...
ABC has 1 million shares outstanding, each of which has a price
of $ 23. It has made a takeover offer of XYZ Corporation which has
1 million shares outstanding, and a price per share of $ 2.55.
Assume that the takeover will occur with certainty and all market
participants know this. Furthermore, there are no synergies to
merging the two firms. a. Assume ABC made a cash offer to purchase
XYZ for $ 3.1 million. What happens to the...
ABC has 1 million shares outstanding, each of which has a price of $25. It has...
ABC has 1 million shares outstanding, each of which has a price
of $25. It has made a takeover offer of XYZ Corporation, which has
1 million shares outstanding and a price per share of $2.59. Assume
that the takeover will occur with certainty and all market
participants know this. Furthermore, there are no synergies to
merging the two firms.
a. Assume ABC
made a cash offer to purchase XYZ for $4 million. What happens to
the price of ABC and...
ABC has 1.00 million shares outstanding, each of which has a price of $ 17. It...
ABC has 1.00 million shares outstanding, each of which has a
price of $ 17. It has made a takeover offer of XYZ Corporation,
which has 1.00 million shares outstanding, and a price per share of
$ 2.27. Assume that the takeover will occur with certainty and all
market participants know this. Furthermore, there are no synergies
to merging the two firms.
A. Assume ABC made a cash offer to purchase XYZ for $ 3.67$3.67
million. What happens to the...
ABC has 1.00 million shares outstanding, each of which has a price of $18. It has...
ABC has 1.00 million shares outstanding, each of which has a
price of $18. It has made a takeover offer of XYZ Corporation,
which has 1.00 million shares outstanding, and a price per share
of $2.49. Assume that the takeover will occur with certainty and
all market participants know this. Furthermore, there are no
synergies to merging the two firms. a. Assume ABC made a cash offer
to purchase XYZ for $3.68million. What happens to the price of ABC
and...
ABC has 1.00 million shares outstanding, each of which has a price of $15. It has...
ABC has 1.00 million shares outstanding, each of which has a
price of $15. It has made a takeover offer of XYZ Corporation,
which has 1 million shares outstanding, and a price per share of
$2.54. Assume that the takeover will occur with certainty and all
market participants know this. Furthermore, there are no synergies
to merging the two firms.
a. Assume ABC made a cash offer to purchase XYZ for $ 3.58
million. What happens to the price of...
ABC Corporation has 1/2 million shares of common stock outstanding, 1 million shares of preferred stock,...
ABC Corporation has 1/2 million shares of common stock
outstanding, 1 million shares of preferred stock, and
20,000 4.5% semiannual bonds outstanding. The common
stock has a beta of 1.2. The corporate bond has a par value of
$1,000 each and matures in 21 years. Currently the bonds are
selling at 104% of their face values. The market risk premium is
10%. The risk-free rate is 2.5%. The common stock sells for $75 per
share. The preferred stock sells for...
a. An all-equity company ABC has nine million outstanding shares, with a share price currently at...
a. An all-equity company ABC has nine million outstanding
shares, with a share price currently at £55. The company also has
outstanding debt valued at £75 million. Equity cost of capital is
6.5%. The company has made an announcement of issuing new debt
valued at £210 million. The proceeds of this issue will be used to
repay outstanding debt and to pay out an immediate dividend. Assume
capital markets are perfect.
Required:
i. What is the share price just after...
ABC Industries has 5 million shares of common stock outstanding with a market price of $20.00...
ABC Industries has 5 million shares of common stock outstanding
with a market price of $20.00 per share. The company also has 1
million shares outstanding preferred stock with a market price of
$8.50 per share, and 200,000 bonds outstanding, each with a face
vale $1,000 and selling at 97.5% par value. The cost of equity is
12%, the cost of preferred is 10%, and the cost of debt is 7.46%.
If ABC's tax rate is 34% what is the...
Google currently has a 5 million common shares outstanding, and a 1 million preferred shares outstanding,...
Google currently has a 5 million common shares outstanding, and
a 1 million preferred shares outstanding, and 100,000 bonds
outstanding. Calculate Google Weighted Average Cost of Capital
(WACC) if the corporate tax rate is 35%. (Using excel and
making formulas viewable)
The average cost of equity of Google is
19.04%.
The cost of Google’s preferred stocks if it is currently
priced at $100 is 6%.
The pre-tax cost of debt of Google is
6.85%.
The Zara Company has one million ordinary shares outstanding, which currently trade at a price of...
The Zara Company has one million ordinary shares outstanding,
which currently trade at a price of $50. The company believes that
its shareholders require a 15% return on their investment. The
company also has a $47.1 million (face value) in five-year, fixed
rate bonds with a coupon rate of 8% and a yield to maturity of 7%.
Because the yield on these bonds is less than the coupon rate, they
trade at a premium. Tax rate applicable on the company...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A 10 g bullet traveling at 350 m/s strikes a 9.0 kg , 1.2-m-wide door at...
- Using dataset "PlantGrowth" in R (r code) Construct a 95% confidence interval for the true mean...
- Write a complete Java Program to solve the following problem. February 18 is a special date...
- A newly issued bond pays its coupons once annually. Its coupon rate is 8%, its maturity...
- My language is Chinese. Question: Describe how tone is used in your own language. Is tone...
- Homestead Oil Corp. was incorporated on January 1, 2019, and issued the following stock for cash:...
- Draw an example of an octahedral complex that takes part in a ligand to metal charge...
ADVERTISEMENT