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:

Problem 15-2 The ABC Corporation is considering opening an office in a new market area that would allow it to increase its annual sales by $4.2 million. The cost of goods sold is estimated to be 40 percent of sales, and corporate overhead would increase by $334,000, not including the cost of either acquiring or leasing office space. The corporation will have to invest $4.2 million in office furniture, office equipment, and other up-front costs associated with opening the new office before considering the costs of owning or leasing the office space.   A small office building could be purchased for sole use by the corporation at a total price of $6.2 million, of which $900,000 of the purchase price would represent land value, and $5.3 million would represent building value. The cost of the building would be depreciated over 39 years. The corporation is in a 21 percent tax bracket. An investor is willing to purchase the same building and lease it to the corporation for $484,000 per year…

Your firm is selling 6 million shares in an IPO. You are targeting an offer price of $19.13 per share. Your underwriters have proposed a spread of 6.9%, but you would like to lower it to 5.4%. However, you are concerned that if you do so, they will argue for a lower offer price. Given the potential savings from a lower spread, how much lower can the offer price go before you would have preferred to pay 6.9% to get $19.13 per share? The offer price would need to drop to $. (Round to the nearest cent.)

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