You are evaluating the acquisition of a firm in your industry. You plan a 4-for-5 exchange of your shares for shares in the target. Assume the following data is available. Compute the value of the combined firm and the new price per share. Then determine the NPV of the stock offer. Acquiring VA ΝΑ PA S NSE Value of combined firm $ New price per share $ NPV of stock offer $ $180 10 $18 $19 4 Target VT NT PT $65 5 $13
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- You have the following share price of XYZ. DATE Price 2-Mar-2021 $100 3-Mar-2021 $60 4-Mar-2021 $40 5-Mar-2021 $100 Investor C bought 100 shares of XYZ on 2-Mar-2021, bought another 100 shares on 4-Mar-2021 and sold all the shares on 5-Mar-2021. Which answer is the closest value to the dollar-weighted average rate of return for the investor? A. 20% B. 0% C. 15% D. 25%You have been asked to assess the impact of a proposed acquisition on the beta of a firm and have been provided the following information on the two firms involved in the deal: The risk-free rate is 4% and the equity risk premium is 6%. Now assume that Acquirer plans to retire all of Target’s debt and that it will be able to buy Target’s equity at the current market price. If Acquirer would like to have a levered beta of 1.35 for the combined firm after the transaction, estimate how much new debt it will need to raise to finish this acquisition.Suppose that the last sale of Company X stock was at a price of $50. Further suppose that an investor wishes to place a market order to purchase 25,000 shares of Company X stock. What is the volume weighted average price that the investor will trade at in each of the market? What if the investor purchase 120,000 shares instead 25,000? Market Depth - Market A vs B Market AMarket B#SharesOffer ($)#SharesOffer ($)30,00050.0010,00050.0040,00050.0210,00050.0110,00050.0570,00050.0320,00050.0680,00050.0430,00050.0760,00050.0510,00050.0940,00050.05
- Costco (NASDAQ: COST) proving its strength as a consumer staples stalwart and has seen its share price strongly outperform the S&P 500 over the last month. Suppose you have purchased a Costco stock, which type of option should be chosen for hedging? Based on the option you selected, choose the appropriate strike price to calculate the option price, assuming the Costco is on a non-dividend-paying stock and the current stock price and strike price are given in the question, the risk-free interest rate is 3% per annum, the volatility is 30% per annum, and the time to maturity is four months.Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900. a. If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger? b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium? d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2…You are thinking about investing in either X corp, or Y corp. Based on the following market measures, which company could be the best option based on possible return of investment? x y Price/Earnings Ratio 10.39 12.27 Earnings per Common Share 3.5 5.4 Divident Payout .464 .320
- Wonda Inc aims to acquire Ovaltime Ltd in the near future. As an analyst, you have compiled the data as follows:As per the table is shown above, calculate the following:a) of shares to be issued by the acquirerb) Post-merger EPSc) Post-merger P/E if market is efficientd) Post-merger P/E if market is not efficiente) One-day after the M&A process, the new company stock price becomes Rm 10, with 3-month T-bills 5%, bursa Malaysia return was 12% with risk premia of 0.8. Is there any abnormal return from the M&A Process? Prove it.For the following stock investment, find (a) the total purchase price, (b) the total dividend amount, (c) the capital gain or loss, (d) the total return, and (e) the percentage return. Ignore broker and SEC fees. (a) What is the total purchase price? $ (Simplify your answer.) ... Number of shares Purchase price per share Dividend per share Sale price per share 20 $22.50 $1.35 $19.45Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding Price per share 6,000 1,200 $ 47 $ 17 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,500. a. If Firm T is willing to be acquired for $19 per share in cash, what is the NPV of the merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $19 per share in cash, what is the merger premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for…
- You took a long position in a call option on DBS’s share. The option premium is $7 per contract and the option has an exercise price of $25. DBS’s share is currently trading at $30. (d) Construct a payoff function to graphically illustrate your profit level when DBS’s share is $20, $30 and $40, and indicating the share price for you to breakeven for this long position. (e) What must the share price be for the option to be at the money?You are an investment adviser. One of your clients approaches you for your advice on investing inequity shares of Theta Company. You have collected the following data:Earnings per share last year $6.00Payout ratio 0.40Return on equity 0.30Cost of equity capital 0.20The company plans to increase the payout ratio to 60% from year 5.Required:i) Estimate the price of an equity share of this company using an appropriate dividenddiscount model and advise your client whether they should buy a share of the company.ii) Your client is keen to know whether there are any growth opportunities from theirinvestment. Explain to your client the meaning of this concept using appropriatecalculations.iii) If there are positive or negative growth opportunities, explain the reason for suchopportunities.Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar- weighted return on your investment is Answers: А. -1.75%. B. 8.00%. C. 4.08%. D. 8.53%. Е. 12.35%.