EMU is in a bidding war with WMU to acquire Ypsi.Ypsi stocks are currently trading at $65/share• WMU has already made an offer of $75• The intrinsic value of Ypsi to EMU is $95What bidding option is reasonable?Nothing--current bid of $75 is already too high compared to the market price of $65Offer at least $95 to defeat WMUBid between $65 and $75--not to go over your head and loose shareholder valuesBid between $75 and $95--it still is a good value!

Bidding refers to the process of selling an asset or even firm where prospective purchasers submits their prices that they are willing to spend for the asset on bid and the highest bid placing person purchases the asset by wining the bidding process.The answer is "option fourth". The bid can be placed for any price falling between $75 and $95 because intrinsic value is $95. It implies that firm is undervalued in market with a price of $65 and even at $75 bid placed by another bidder. If EMU can acquire it any price below $95, it will remain good deal because EMU will be benefited from future benefits derived from acquisition. So, the $75 to $95 range is a good deal because firm is still undervalued at this price range. Other Option: (First) The bid of $75 is above $65 but still it is below the actual worth of stock which shows prospective growth and investment opportunity. (Second) The $95 bid is the maximum not the least that can be placed to defeat another bidder. (Third) Bidding between $5 to $75 is irrelevant because another bidder will surely win the deal.

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EMU is in a bidding war with WMU to acquire Ypsi. • Ypsi stocks are currently trading at $65/share • WMU has already made an offer of $75 · The intrinsic value of Ypsi to EMU is $95 What bidding option is reasonable? O Nothing--current bid of $75 is already too high compared to the market price of $65 Offer at least $95 to defeat WMU O Bid between $65 and $75--not to go over your head and loose shareholder values Bid between $75 and $95--it still is a good value!

EMU is in a bidding war with WMU to acquire Ypsi. • Ypsi stocks are currently trading at $65/share • WMU has already made an offer of $75 · The intrinsic value of Ypsi to EMU is $95 What bidding option is reasonable? O Nothing--current bid of $75 is already too high compared to the market price of $65 Offer at least $95 to defeat WMU O Bid between $65 and $75--not to go over your head and loose shareholder values Bid between $75 and $95--it still is a good value!

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A call option with the strike price of ₹ 1900 costs ₹ 2.90 and a put option with strike price of ₹ 1850 costs ₹ 3.50 per share of Larsen and Tubro Ltd. Create a long strangle from these options. (Give the Table) What will be the profit pattern if the spot rate of the stock on expiration is 1400, 1450, 1550, 1600, 1650, 1750, 1850, 1950 per stock? (Lot size is 1000) Interpret the results by explaining characteristics of the strangle strategy. Also draw the diagram with proper labelling.
V3. Which of the following statements about IPO is correct? O In a market without agency problem, Dutch auction is the worst among the three IPO methods in terms of finding out the best reservation price of the IPO shares • In a firm commitment cash offer, the underwriter would buy the whole issue from the issuer, and then sell the issue to the market. O Best efforts cash offer is the most popular IPO method in the US market. • In the best efforts cash offer, a firm would have to continue the issuance even if the demand does not meet their expectation.
The current market price for common shares of Getgo Company is $15. Put options on these shares currently trade at 0.75 and come with a $10 strike price. If the stock’s market price falls to $8.45 what would be the dollar return earned on these put options? Your answer should look like this 1.2 that is not the right answer
KT corporation has announced plans to acquire MJ corporation. KT is trading for $45 per share and MJ is trading for $25 per share, with a premerger value for MJ of $3 billion dollars. If the projected synergies from the merger are $750 million, what is the maximum exchange ratio that KT could offer in a stock swap and still generate a positive NPV? It is closest to: Answer choices: A) 0.75 B) 3.30 C) 2.25 D) 1.30
Conglomerate Inc. is trading at $80/share, and is about to announce its intent to acquire Tiny Corp. who is an all-equity firm with 20 million shares trading at $5/share. The projected synergies from the acquisition are $15 million. What is the maximum exchange ratio Conglomerate Inc. could offer in a stock swap and still have the deal be positive NPV? 18.4 1.43 11.24 1.66
A speculator can choose between (i) buying 108 shares of a stock for $50.58 per share, and (ii) buying 1080 European call options on that stock with a strike price of $42 for $3.99 per option. At maturity, what is the stock price that would make the two alternatives equally profitable? a. 1.58 O b. 42.81 O c. 47.57 d. 45.96 e. 14.18
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos. 3.) What is the Intrinsic Value
A decision maker faces an uncertain venture where he/she may earn $10.000 (with a probability p) or nothing. Following mutually exclusive options to this uncertain venture are listed below. The decision maker's statements are given following each option: • A certain venture that will bring $3.000 at the end of one year. "I will invest my money to this certain venture unless there's a 50% chance of winning the $10.000" • A certain venture that will bring $5.000 at the end of one year. "I will invest my money to this certain venture unless there's a 75% chance of winning the $10.000" • A certain venture that will bring $7.000 at the end of one year. "1 will invest my money to this certain venture unless there's a 88% chance of winning the $10.000" • A certain venture that will bring $9.000 at the end of one year. "1 will invest my money to this certain venture unless there's a 97% chance of winning the $10.000" On the other hand if the utility values for $10.000 and $0 are 1 and 0.1…
Honeywell does not pay a dividend and its stock has a volatility of 28% and a current stock price of $67 per share. The risk-free interest is 4%. Determine the Black-Scholes value of a one-year, at-the-money call option on Honeywell's stock. (You must show me how you do this without an Excel-based option pricing model. That is, you must show your work with the formulas and Z-Tables. The value will likely be different than if you just plug into an Excel-based BSOPM). The call option's value is $. (Round to the nearest cent.)
A large manufacturing company has offered to purchase Composites, Inc. for$32 per share. Before the merger proposal announcement, Composites wastrading at $20/share and, after the announcement, its share price jumped up to$28/share. It is estimated that, if the merger fails to go through, the price ofComposites will drop to $15/share. a) Assuming that the risk-free interest rate is 0%, how would you describea long position in Composites as a combination of positions in a risk-freebond and a binary put option? Please show your workings in detial.b) Assuming that the risk-free interest rate is 0%, how would you describea long position in Composites as a combination of positions in a risk-freebond and a binary call option? Please show your workings in detial.c) Please explain the event-driven strategies through the selling insuranceview.
5 Construct payoff tables or payoff diagrams on expiration to show what position in IBM puts, calls and/or underlying stock best expresses the investor's objectives described below. Assume IBM currently sells for $100. Make appropriate assumptions about the strike prices of options in each case. Ignore the cost of options. a/ An investor wants the position to be at least worth $75. Further the investor believes that the IBM stock price will go up but will at most reach $140.
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