Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 26, Problem 4QP
Summary Introduction
To construct: The
Introduction:
A merger is the total absorption of one company by another, where the firm that is acquiring retains its uniqueness and it terminates the other to exist as an individual entity.
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Consider the following information about Firm A and Firm T:
Item
Firm A (Acquiring firm)
Firm T (Target firm)
Price per share
$20
$15
Outstanding shares
50
25
Total market value
$1000.00
$375
Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the NPV of the acquisition to firm A?
Select one:
a.
$1075.00
b.
$575.00
c.
$425.00
d.
$555.00
Consider the following information about Firm A and Firm T:
Item
Firm A (Acquiring firm)
Firm T (Target firm)
Price per share
$20
$15
Outstanding shares
50
25
Total market value
$1000.00
$375
Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium?
Select one:
a.
$150.00
b.
$135.00
c.
$125.00
d.
$175.00
Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial
data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in
this merger.
Sales (millions)
Net income (millions)
Koala
$90
$9.4
O a. $2.23
O b. $2.75
O c. $2.25
O d. $2.21
Laser
$10
$1.2
Common shares outstanding (millions) 4.0
0.8
Earnings per share
$2.35
$1.50
Common stock (price per share) $35.00
$27.00
Calculate the post-merger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange
Chapter 26 Solutions
Fundamentals of Corporate Finance
Ch. 26.1 - Prob. 26.1ACQCh. 26.1 - Prob. 26.1BCQCh. 26.2 - Prob. 26.2ACQCh. 26.2 - Prob. 26.2BCQCh. 26.3 - Prob. 26.3ACQCh. 26.3 - Prob. 26.3BCQCh. 26.4 - Prob. 26.4ACQCh. 26.4 - Prob. 26.4BCQCh. 26.5 - Prob. 26.5ACQCh. 26.5 - Prob. 26.5BCQ
Ch. 26.6 - Prob. 26.6ACQCh. 26.6 - Prob. 26.6BCQCh. 26.7 - Prob. 26.7ACQCh. 26.7 - Prob. 26.7BCQCh. 26.8 - Prob. 26.8ACQCh. 26.8 - Prob. 26.8BCQCh. 26.9 - Prob. 26.9ACQCh. 26 - Prob. 26.3CTFCh. 26 - What factors should be considered when deciding...Ch. 26 - Prob. 1CRCTCh. 26 - Prob. 2CRCTCh. 26 - Prob. 3CRCTCh. 26 - Prob. 4CRCTCh. 26 - Prob. 5CRCTCh. 26 - Prob. 6CRCTCh. 26 - Prob. 7CRCTCh. 26 - Prob. 8CRCTCh. 26 - Prob. 9CRCTCh. 26 - Prob. 10CRCTCh. 26 - Prob. 1QPCh. 26 - Prob. 2QPCh. 26 - Prob. 3QPCh. 26 - Prob. 4QPCh. 26 - Prob. 5QPCh. 26 - Prob. 6QPCh. 26 - Prob. 7QPCh. 26 - Prob. 8QPCh. 26 - Cash versus Stock as Payment [LO3] In the previous...Ch. 26 - Prob. 10QPCh. 26 - Prob. 11QPCh. 26 - Prob. 12QPCh. 26 - Prob. 13QPCh. 26 - Prob. 14QPCh. 26 - Prob. 1MCh. 26 - Prob. 2MCh. 26 - Prob. 3MCh. 26 - Prob. 4M
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