Part I: You are advising company ABC on its merger and acquisition case. The buyer company offers ABC two options. -  Option #1= $100 million cash at the acquisition date. - Option #2 = $25 million cash at the acquisition date and another additional $90 million AFTER one year. The management team of ABC perceives a 30 percent annual discount rate. Which option should ABC choose? Show your work.

Discuss the limitations of the dividend share valuation model for well established firms which have been listed on a stock exchange for many years.

The following table provides the annual profits of two startup tech firms along with their present value of profits calculated at an interest rate of 5 percent. Which firm would be your recommendation for an acquisition? Explain. Year Firm AProfits Firm BProfits 1 $1,000,000 $5,000,000 2 $1,200,000 $2,000,000 3 $1,400,000 ($800,000) 4 $1,500,000 $500,000 5 $1,600,000 ($100,000) PV $5,737,885 $6,217,892

A long forward contract means that the contract will become more valuable as the price of the asset declines. true or false

Saga City has a declassified board with nine directors. a. How many directors come up for election each year? Number of directors b. Would Saga be more or less vulnerable to a hostile takeover if it had a classified board? More Less

3. We consider the following situation between 2 firms. Firm A (the "acquirer") would like to take over firm T (the "target"). It does not know firm I's value; it believes that this value, when firm T is controlled by its own management, is at least $0 and at most $100, and assigns equal probability to each of the dollar values in this range (we assume that the value is distributed uniformly on this interval). Firm T will be worth 50% more under firm A's management than it is under its own management. Suppose that firm A bids p to take over firm 7; and firm T is worth x (under its own management). Then if T accepts A's offer, A's payoff is 2x-p and T's payoff is p; if T rejects A's offer, A's payoff is 0 and T's payoff is x. (a) Formalize this situation as a Bayesian Game (b) Find the Bayesian Nash Equilibria of this game.

Question 1 Part B: You want to develop a new product and you want to make your money back as quickly as possible. There are four potential products that you can invest in. Project 1 Project 2 Project 3 Project 4 Initial Cost $60,000 $70,000 $77,500 $85,000 Annual $10,500 $16,000 $8,500 $15,000 Revenues Length of Ownership 6 4 9 10 Question 1 Part B: Provide the conventional payback period for Project 1. Enter your answer in the form: 1.23

Shareholders have legally limited liability with respect to the contracts the company enters into. Explain why such institutional arrangements may lead to an excessive risk appetite of firms depending on the debt ratio.

1. What is the definition of Strategy? Why is it important? 2. What are the strategic planning processes seven (7) steps? 3. What are the strategic planning processes important? 4. What NEGATIVE impact can no strategic planning have on any business?

6   What was Northern Rock’s biggest strategic mistake?