VS is contemplating the acquisition of TG. Each company has 1 million shares outstanding You are given...

VS is contemplating the acquisition of TG. Each company has 1 million shares outstanding
You are given the following information:
Value of VS alone (in million)	107
Value of TG alone (in million)	56
From merger, the estimated reduction in after-tax R&D costs per year in perpetuity (in million)	3
VS is considering a cash offer to TG (in million):	72.8
Cost of capital	0.11
Tax-rate	0.3

What would be the gain from the merger?


Now suppose that instead of making a cash offer, VS cosiders offering TG shareholders a 50% holding in VS.
What is the value of stock in the merged company held by the original TG shareholders?
What is the cost of the stock alternative?
vWhat is the NPV under the stock offer?

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

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