Firm A and Firm B are all-equity firms. Max Power has 240,000 shares outstanding at a market price of $36 a share. Firm B has 560,000 shares outstanding at a price of $62 a share. Firm B is acquiring Firm A for $9,340,000 in cash. The synergy value of the acquisition is $1,180,000. What is the net present value of acquiring Firm A to Firm B?
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$514,000 |
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$502,000 |
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$490,000 |
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$480,000 |
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$470,000 |
Net Present value = Present value of cash inflows - Present value of cash outflows
= Value of shares*Number of Shares + Synergy benefits - Cash paid
= 240,000*36 + 1,180,000 - 9,340,000
= $480,000
Hence, the answer is $480,000
Firm A and Firm B are all-equity firms. Max Power has 240,000 shares outstanding at a...
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