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 2 years 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...
Question 2 – Mergers and Acquisitions ABC has 1 million shares outstanding, each of which has...
Question 2 – Mergers and Acquisitions
ABC has 1 million shares
outstanding, each of which has a price of $20. It has made a
takeover offer of XYZ Corporation which has 1 million shares
outstanding and a price per share of $2.50. Assume that the
takeover will occur with certainty and all market participants know
this. Furthermore, there are no synergies to merging the two
firms.
Required:
Assume ABC made a cash offer to purchase XYZ for $3
million. What...
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...
ABC Co has 10 million shares of common stock outstanding which currently trades at a market...
ABC Co has 10 million shares of common stock outstanding which
currently trades at a market price of $5 per share. The company
also has 100,000 bonds issued which are trading at $1,050 per bond.
ABC has not issued any preferred stock. If ABC’s cost of equity is
10% and their effective cost of debt is 5%, what is their WACC?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Identify a wireless threat and how to mitigate it. Need 300 words Don't rewrite already existing...
- Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
- Suppose Alcatel-Lucent has an equity cost of capital of 10.6 %, market capitalization of $ 11.20...
- Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 140...
- McDonald Q1: What skills do the individuals need to improve? ANS: &nb
- Answer the following questions about Windows registry: 1) Name at least four actions that trigger automatic...
- explain financial environment of India
ADVERTISEMENT