Question 2Optimust Berhad (Optimust) is a manufacturing company. It is currently considering taking overanother company, known as Bumblebeet Berhad (Bumblebeet). The board of directors ofOptimust Berhad intends to make a bid soon and has now approached you to assist them toascertain a value on Bumblebeet. You are given the following information:Optimust BumblebeetNumber of ordinary shares in issue 5 million 1 millionPrice per shareRM5RM3Both Optimust and Bumblebeet are 100% owned by their shareholders. Optimust estimates thatthe value of the synergistic benefit from acquiring Bumblebeet is RM300,000.Optimust is evaluating two possible options as follows:i. To pay RM2.50 in cash for every share of Bumblebeetii. To offer its 5% of unit shares in issue to Bumblebeet's shareholdersFrom the above information you are required to:a. Calculate the value of Bumblebeet to Optimust.b. Determine the Net Present Value (NPV) for each option.c. Based on the NPV (in part b), choose the best option for Optimust. Interpret your findings toOptimust.

The value of Bumblebeet to Optimust is the sum of the market value of Bumblebeet and the synergistic…

Answered: Question 2 Optimust Berhad (Optimust)…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(i) ABC Company’s management decides to list its shares on a stock exchange for the first time. List and briefly discuss the type of shares they could list and their characteristics. (ii) List and explain three reasons why managers would consider merging with another company. Provide as an example one recent merger case (worldwide) and suggest what the motive for this merger was.
Question 11, P1-5 (book/static) Identifying agency problems, costs, and resolutions You are the CEO of Nelson Corporation, and the current stock price is $27.80. Pollack Enterprises announced today that it intends to buy Nelson Corporation. To obtain all the stock of Nelson Corporation, Pollack Enterprises is willing to pay $38.60 per share. At a meeting with your management, you realize that the management is not happy with the offer and is against the takeover. Therefore, with the full support of your management team, you are fighting to prevent the takeover from Pollack Enterprises. Is the management of Nelson Corporation acting in the best interest of the Nelson Corporation stockholders? Explain your reasoning. Is the management of Nelson Corporation acting in the best interest of the Nelson Corporation stockholders? Explain your reasoning. (Choose all correct responses.) O A. If the management team believes that any other company will actually pay more than $38.60 to acquire the…
Happy Harry Hoskins and Crabby Cynthia Crowders are organizing Red Lodge Metals Unlimited, Inc., to undertake a high risk gold mining venture in Canada. Mr. Hoskins and Ms. Crowders tentatively plan to request authorization for 400,000,000 shares of common stock to be sold to the general public. Mr. Hoskins and Ms. Crowders have decided to establish par value at $0.03 per share in order to appeal to a wide variety of potential investors. They believe that investors would be more willing to invest in a company if investors received a large quantity of shares for what might appear to be a "bargain" price. Discussion: Are Mr. Hoskins and Ms. Crowders acting ethically? Please discuss.
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