PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 31, Problem 12PS
Summary Introduction

To determine: The highest price Company W is willing to pay Company M shareholders.

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Gobi Desserts is bidding to take over Universal Puddings. Gobi has 3,500 shares outstanding, selling at $55 per share. Universal has 2,500 shares outstanding, selling at $22.50 a share. Gobi estimates the economic gain from the merger to be $22,500. Required: If Universal can be acquired for $25 a share, what is the NPV of the merger to Gobi? What will Gobi sell for when the market learns that it plans to acquire Universal for $25 a share? (Round your answer to 2 decimal places.) What will Universal sell for? Assume that the market expects the merger to go through without any further bidding. What are the percentage gains to the shareholders of each firm? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, Gobi sells for $55, so instead of paying $25 cash, Gobi issues 0.45 of its shares for every Universal share acquired. What will be…
Acquiring Corp. is considering a takeover of Takeover Target Inc. Acquiring has 12 million shares outstanding, which sell for $20 each. Takeover Target has 6 million shares outstanding, which sell for $10 each. If the merger gains are estimated at $24 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders?
Acquiring Corporation is considering a takeover of Takeover Target Incorporated. Acquiring has 16 million shares outstanding, which sell for $30 each. Takeover Target has 8 million shares outstanding, which sell for $23 each. If the merger gains are estimated at $40 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders? Highest price per share
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