Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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 the price of the merged firm? (Round your answer to 2 decimal places.)
- What is the NPV of the merger to Gobi when it uses an exchange of stock? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)
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