Consider the following premerger information about a bidding firm (Firm B) and a
ID: 2764473 • Letter: C
Question
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 has estimated that the value of the synergistic benefits from acquiring Firm T is $9,200. Firm T can be acquired for $20 per share in cash or by exchange of stock wherein B offers one of its share for every two of T's shares.
At what exchange ratio of B shares to T shares would the shareholders in T be indifferent between the two offers? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
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.
Explanation / Answer
If Share aquire on cash 20*2000-18*2000=4000 If shares are aquired on share MV(b+t)= Mvb+MVt+Synergy Gain 5400*44+2000*18+9200 282800 MV(b+t)*% of halding-MVt 282800*1000/6400-36000 8188