ABC and XYZ have total equity values of P5,000,000 and P10,000,000 respectively. If they merged, a total of 30,000 P500-par value shares may be issued. Each share can provide investors a rate of return of 18%, a growth rate of 3% and annual dividends of P78 per share for the first year. What is the total value of synergy that the merger will provide?
Q: 9.5 In a private values model, argue that it is a weakly dominant strategy for a bidder to bid his…
A: A weakly dominated approach is one that produces the same or worse results as an alternative…
Q: alculate the simple interest earned on an investment of: $4 200 at 4.5% for 200 days Select one:…
A: We need to use simple interest formula to calculate simple interest Simple interest…
Q: Rafner Manufacturing identified the following budgeted data in its two production departments.…
A: Overhead are those expenses which is incurred during the production of any product. it will be…
Q: What is the present value of the following set of cash flows at an interest rate of 6% p.a.…
A: Present Value: The present value is the current value of a series of fixed payments. The series of…
Q: Compute the expected return given these three economic states, their likelihoods, and the potential…
A: Probability Return 0.3 40% 0.4 15% 0.3 -15%
Q: Find the present value of a deferred annuity of P9565 every six months for 4 years that is deferred…
A: To calculate the present value we will use the we will use the below formula Present value =…
Q: There is a bond that has a quoted price of 93.105 and a par value of $2,000. The coupon rate is 6.48…
A: Yield to maturity can be calculated by following function in excel =RATE (nper, pmt, pv, [fv],…
Q: Blake Inc. has a leveraged beta of 1.10, a capital structure made up of 40% debt and 60% equity, and…
A: Unlevered beta of the company means pure business risk and any type of business risk is not…
Q: According to our authors, when is the purchase of stock in one company by another classified as a…
A: Trading security- Classification of securities- There are three different classification: a) held…
Q: provided. After careful deliberation. Hope decides on a plan from Acadian Alliance Life Insurance…
A: Answer (a)
Q: Suppose a state lottery prize of $3 million is to be paid in 5 payments of $600,000 each at the end…
A: We will apply the concept of time value of money here. As per the concept of time value of money the…
Q: maturity. If the market rate of interest is 10%, the bonds should sell for:
A: Information Provided: Face value = $1000 Coupon rate = 12% Years to Maturity = 15
Q: how much interest will mico pay
A: PV = A[ (1-(1/(1+r)^n)/ r] Where PV = present value, A = Annuity amount. r = interest rate. n =…
Q: According to our authors, define and provide an example of an “effective interest rate.
A: Effective interest rate- Formula for Effective interest rate= 1+Nominal Annual interest ratenn-1…
Q: acob PLC is listed on the Stock Exchange. Analysts estimate the stock’s equity beta to be at 2.17.…
A: Hi There, As per the Honor code of Bartleby we are bound to give the answer of first three sub part,…
Q: Suppose you just won the state lottery, and you have a choice between receiving $3,550,000 today or…
A: Choice-1 Amount to receive today is $3,550,000 Choice -2 Annuity amount is $250,000 Time period is…
Q: 3. Consider a two-year coupon bond with a face value of $1,000 and a coupon rate of 5%. Investor A…
A: As per the honor code of Bartleby we are bound to give the answer of first three sub parts, please…
Q: how was the rate found?
A: Details about property are as follows: Name of Item Date of purchase Relates to which Quarter…
Q: A Corp. and B Company will be merging. Independently, A has forecasted annual earnings of P400,000…
A: Value of A corp will be, = Earnings / Return% = 400000 / 16% = P2,500,000 Earnings of B corp…
Q: How much interest (to the nearest dollar) would be saved on the following loan if the home were…
A: Effect of the period in loan: Your monthly payments will typically be cheaper than they would be if…
Q: Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds…
A: Current price = $868.43 Coupon rate = 0.06 Par value = $1,000 Annual coupon amount = Par value *…
Q: You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price…
A: Net present value (NPV) It is a capital budgeting tool that helps in deciding whether the capital…
Q: Which of the following statements is CORRECT? A stock's standard deviations is more relevant as a…
A: Market risk is reflecting of all such risks which can never be eliminated even through…
Q: ABC Co., a private contractor, wins a bid to construct an expressway for a provincial government,…
A: As per the Provision of PFRS 115 revenue from contract with customers, revenue can be recognize on…
Q: ain why would a firm consider investing in a portfolio of foreign currencies instead of just a…
A: Firms always invest in different currencies while doing the business at international levels but…
Q: What is the current yield on a zero coupon bond with a remaining life of 11 years, a yield to…
A: Par value or maturity value (Z) = $1,000 Yield to maturity (YTM) = 0.051 Maturity period (p) = 11…
Q: What is the percentage change in a 5-year zero-coupon bond with a duration of 5 years, when interest…
A: To calculate the percentage change in bond price we will use the below formula Change in bond…
Q: A design studio purchase a camera. If they settled the loan in 2 years by making quarterly payments,…
A: Loans are to paid by the periodic payments that carry the payment for loans and payment for interest…
Q: a. A pension fund has to pay out $750,000 to the retirees at the end of every month for the next 50…
A: Time value of money (TVM) refers to the method or concept which is used to determine the amount of…
Q: Doisneau 22-yearbonds have an annual coupon interest of 11percent, make interest payments on a…
A: Data given: Par value = $ 1000 Coupon rate = 11% (semi-annual) = 11%/2 = 5.5% N=22 year n=Period =…
Q: Paraphrase + explain this sentence: If Nikken Microsystems' opportunity cost of capital is 16.667%,…
A: The return a firm must achieve to pay the cost of a capital project, such purchasing new machinery…
Q: lynn deposits $683.09 at the beginning of each quarter for three years in order to accumulate…
A: Quarterly deposit = $683.09 Future value = $9500.60 Period = 3 Years Number of quarterly deposits =…
Q: Question 3 What is the future value four years from now of each of the following cash-flow streams…
A: Interest rate = 5.25% compounded quarterly Effective Interest Rate = (1 + (Interest Rate / Number of…
Q: State and Prob. Project A's return Good. 30% Average 40% Poor 30% 27 18 5 Project B's return 35 15…
A: “Since you have posted a question with multiple subparts, we will solve the first three subparts for…
Q: Deakin University wants to establish a trust fund that will provide a perpetual annual scholarship…
A: The notion of the present value asserts that an amount of money today is worth more than the same…
Q: George took out a mortgage loan of $1 120 000 for 12 years at 4.55% p.a. compounding weekly. What is…
A: Mortgage loan = $1,120,000 Time Period = 12 Years Interest Rate = 4.55%
Q: What will be the future value of $5 000 invested for six years at 8% per annum compounded annually?
A: Information Provided: Principal value = $5000 Interest rate = 8% compounded annually Years = 6
Q: Assume that Skye uses the book value of each capital compoent for the weights of capital components.…
A: WACC: It is calculated by adding all the costs of capital of individual sources of capital that are…
Q: Minion, Inc., has no debt outstanding and a total market value of $284,900. Earnings before interest…
A: There are uncertainties in the market and different conditions are possible and under these…
Q: What would you expect the nominal rate of interest to be if the real rate is 4.2% and the expected…
A: Solution:- Nominal rate of interest means rate of interest after the effect of inflation in real…
Q: Compute the missing variable for each of the following alternatives of investments to accumulate…
A: The present value can be converted the future value using the technique of compounding, while the…
Q: A P15,000 loan at 12% compounded quarterly is to be amortized every 3 months for 12 years. Find the…
A: Here, To Find: Quarterly payment =? Construction of amortization schedule =?
Q: Calculate the value of a bond that matures in 13 years and has a $1000 par value. The annual coupon…
A: Current Value of bond is calculated with the help of NPV method under capital budgeting in that…
Q: The current market value of a firm’s share is $32 million, with 20 million shares outstanding. The…
A: The price to earning valuation model is a model for determination of value of company on the basis…
Q: Find the APR (rounded to the nearest tenth of a percent) for the loan described below. Purchase a…
A: The annual percentage rate refers to the cost that is paid each year for borrowing the money…
Q: (Bond valuation) A bond that matures in 11 years has a $1,000 par value. The annual coupon…
A: Maturity period = p = 11 years coupon rate = 0.08 or 8% Face value or maturity value = Q = $1,000…
Q: What is the delta of the put option? Solution for A = -0.40 b) You short 100 put options. How…
A: Black-Scholes Merton Model: This model is used to compute the price of options contracts. The…
Q: What is an option? How does an Option differ from a forward or future contract?
A: Derivative Security: A derivative is financial security whose price and value are determined based…
Q: Related to Checkpoint 9.1) (Floating-rate loans) The Bensington Glass Company entered into a…
A: As per the given information: Floating rate - 26 basis points (0.26 percent) over an index based on…
Q: Your company has earnings per share of $3. It has 1 million shares outstanding, each of which has a…
A: Given: Particulars Your company Target Co. Earnings per shares $3 $3 Shares outstanding 1 1…
ABC and XYZ have total equity values of P5,000,000 and P10,000,000 respectively. If they merged, a total of 30,000 P500-par value shares may be issued. Each share can provide investors a
Step by step
Solved in 3 steps
- Suppose that Flight Centre has made an offer for Webjet that consists of the cash purchase of 1.4 million shares at $13 per share. The value of Webjet’s stock before the bid was made public was $11 per share. Flight Centre’s stock is trading at $20 per share, and there are 20 million shares outstanding. Flight Centre estimates that the merger synergy will be $3.5 million per year, forever. The appropriate discount rate for these gains is 12%. What is the estimated value of the Flight Centre post-merger?Both of Firm A and Firm B are 100 equity firms. You estimate that the incremental value of the acquisition is $100,000. Firm B has indicated that it will agree to a sale if the price is $150,000, payable in cash or stock. Firm B is worth $100 as a stand-alone, so this is the minimum value that we could assign to Firm B. Calculate the value of firm A after merger. Firm A Firm B Price per share $2 $1 Number of shares 50,000 100,0000Kclub has market value of 680million and Gclub has marketvalue of 170 million. Mergerresult in cost savings of, 500, 000 a year forever. Costsavings will grow at 5% a year.Kclub proposes to buy Gclub for306 million. Payment will be intwo years. Cost of capital is30%. K has 100million shareaand G has 100million shares.Find: A. Present value of mergerB. Cost to shareholders of Kclubfrom merger C. Npvmergerto Kclub shareholders
- A Corp. and B Company will be merging. Independently, A has forecasted annual earnings of P400,000 and overall return of 16%. On the other hand, B had dividends of P480,000 last year, an overall return of 15% and a payout ratio of 80%. Once combined, they will have a total equity value of P7,300,000. How much is the value of synergy between the two entities?Corporation A is deciding on an acquisition. Corporation A would buy all shares of corporation B, for a total of 500,000 shares of B. Currently, corporation B is expected to pay a constant dividend forever of $12 per share. The market price of B shares reflects these expectations, and the required rate of return is 4%. A can buy B shares at their current market price, and management expects to be able to exploit synergies between the two corporations and increase revenues. Thus, according to A’s management, if the acquisition takes place the dividend per share for next year is expected to be $12, but dividends are then expected to grow forever at a rate of 3% per year. The required rate of return on stock B would stay unchanged at 4%. What is the NPV of the acquisition? .Nataro, Inc is planning on merging with Celestia Corp. Nataro, Inc with will pay shareholders the current value of their stock using shares of Nataro as the form of payment. Nataro has 5600 shares outstanding at a market price of $27.25 per share. Celestia Corp has 8,000 shares outstanding at a market price of $5.75 per share. The expected synergy created by the merger is $4200. What is the value of the merged firm (excludes cost of acquisition)? A. 205600 B. 201400 C. 159600 D. 54400 E. 68750
- Denali Inc. is acquiring Whitney Corp. at an exchange ratio of 2:1. After the deal is announced, Denali’s stock price is $25 and Whitney’s stock price is $47. Create a trade that would take advantage of the merger arbitrage opportunity, starting with 100 shares of Whitney’s stock. Show in detail the profit from your portfolio if between today and the deal being completed, Denali’s stock price falls to $20.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:Gobi Desserts is bidding to take over Universal Puddings. Gobi has 3,500 shares outstanding, selling at $55 per share. Universal has 2,500 shares outstanding, selling at $22.50 a share. Gobi estimates the economic gain from the merger to be $22,500. Required: If Universal can be acquired for $25 a share, what is the NPV of the merger to Gobi? What will Gobi sell for when the market learns that it plans to acquire Universal for $25 a share? (Round your answer to 2 decimal places.) What will Universal sell for? Assume that the market expects the merger to go through without any further bidding. What are the percentage gains to the shareholders of each firm? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, Gobi sells for $55, so instead of paying $25 cash, Gobi issues 0.45 of its shares for every Universal share acquired. What will be…
- Firm A and Firm B are all-equity firms. Firm A has 10,000 shares outstanding at a market price of $25 a share. Firm B has 7,500 shares outstanding at a price of $10 a share. Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $14,500. What will the price per share be of the post-merger firm if payment is made in stock? O $27.30 O $25.53 O $26.32 O $25.00 $25.38The Stanley Shoppe Limited (SSL) wishes to acquire The Carlson Card Gallery for $400,000. The Carlson Card Gallery has 50,000 stocks outstanding which are currently quoted at $7 per share. Stanley expects the merger to provide incremental earnings of about $67,000 a year for 10 years. Ken Stanley, the CEO of SSL, has calculated the marginal cost of capital for this investment to be 10 percent. What is the benefit of the merger to the shareholders of The Carlson Card Gallery? Calculate the present value of the synergy of this merger. Estimate if any the benefit of the merger to the shareholders of Stanley Limited. Should the merger take place?Bin plc is taking over Sum plc and has offered two Bin shares for every three Sum shares. You have the following information: Bin plc Sum plc Current share price: £3.01 £1.48 Number of shares: 20m 10m Market value: £60.2m £14.8m Distributable earnings: £5.6m £1.23m Synergy is expected to produce a 5% increase of the combined earnings. The market will apply a price/earnings ratio of 10.75 times to the new entity. What is the expected change in the wealth of Sum's shareholders? Answers: 10.2% 15.2% 25.7% 30.3% 35.6%