Describe what a control premium is and why an acquiring corporation would pay more than the market value of the outstanding shares to acquire a target?
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Describe what a control premium is and why an acquiring corporation would pay more than the...
What is the stock's beta? Why does the stock pay a lower risk
premium than the market?
A stock costs $30. It rises to $40 with probability 0.62 and falls to $20 with probability 0.38. The risk free interest rate is 2%. The market risk premium is 8%.
Keycorp Corporation is acquiring Lucent Technologies Corporation for $563,000 in cash. Keycorp has 19,200 shares of stock outstanding at a market value of $37.60 a share. Lucent Technologies has 17,500 shares of stock outstanding at a market price of $28 a share. Neither firm has any debt. The net present value of the acquisition is $42,000. What is the price per share of Keycorp after the acquisition? $43.08 $41.27 $40.53 $39.79 $38.26
In acquisition accounting, one company is identified as the acquiring company. Which statement below is most likely to be true concerning the acquiring company. Select one: A. Its shareholders sell their stock before the acquisition takes place. B. It pays cash for the acquisition rather than issuing stock. C. It issues stock to acquire the other company. D. Its shareholders receive a premium over market value in the exchange of shares. Poppy Corporation acquires Stevens Company, paying the owners of...
Atlas Corporation is acquiring Bazan, Inc. for $1,670,000 in cash. Atlas has 80,000 shares of stock outstanding at a market value of $55 a share. Bazan has 38,000 shares of stock outstanding at a market price of $39.60 a share. Neither firm has any debt. The net present value of the acquisition is $182,000. What is the price per share of Atlas after the acquisition? $57.28 $56.13 $55.44 $54.21 $58.04
Alpine Corporation is acquiring Beckshire Company for $302,000 in cash. Alpine has 15,000 shares of stock outstanding at a market value of $34 a share. Berkshire has 12,000 shares of stock outstanding at a market price of $23 a share. Neither firm has any debt. The net present value of the acquisition is $51,000. What is the price per share of Alpine after the acquisition? $38.15 $37.40 $36.20 $39.27 $40.15
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.30 (given its target capital structure). Vandell has $8.35 million in debt that trades at par and pays an 7.6% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year. Vandell pays a 35% combined federal and state tax...
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.15 (given its target capital structure). Vandell has $11.41 million in debt that trades at par and pays an 7.3% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 6% a year. Vandell pays a 30% combined federal and state tax...
The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are as follows: A-Rod Corp. Jeter Corp. Total earnings $ 708,000 $ 3,900,000 Number of shares of stock outstanding 295,000 1,950,000 Earnings per share $ 2.40 $ 2.00 Price-earnings ratio (P/E) 20 24 Market price per share $ 48 $ 48 a. The Jeter Corp. is going to give A-Rod Corp. a 50 percent premium over A-Rod’s current market value. What price will it pay?...
2. How many new shares will be issued by Acquiring Company?
3. What is the post-merger EPS of the combined company?
4. What is the post-merger share price of the combined
company?
5. If the purchase is using 100% cash and all the cash is
borrowed at an annual rate of 8%, what is post-merger EPS of the
combined company, assuming the tax rate is 40%?
Acquiring Company is considering the acquisition of Target Company in a stock for stock...
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.60 (given its target capital structure). Vandell has $8.10 million in debt that trades at par and pays an 7.8% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 40% combined federal...