MegaToy Inc is considering acquiring Action Figures Inc, both publicly traded firms in the toy industry. Action Figures is currently trading at $18 per share and has 15 million shares outstanding
The executive team at MegaToy believes that the present value of potential synergies is $70 million if the firms combine. What is the highest bid price per share that MegaToy should consider paying for Action Figure shares? What is the largest percentage premium over the current share price MegaToy would be willing to pay?
The value of Action Figures to MegaToy = $18/share * 15,000,000 shares + $70,000,000 = $340,000,000. The maximum value per share is Value/the number of shares = $340,000,000/15,000,000 = $22.67. This is a ($22.67 - $18.00 )/($18.00 ) = 25.93% premium over the current market price.
You might also like to view...
A firm is required to estimate a liability for repairs for products sold with a warranty. If the firm's accountants later find that the estimated amount for repairs has been overstated, the correct accounting procedure is to
a. make an adjusting entry to reduce the amount of estimate. b. make a correcting entry because the overstatement is an error. c. show the amount of overstatement on the income statement as a loss. d. do nothing for the year in question and modify the next year's estimate.
List the ways in which a sender can cultivate a "you attitude."
Who posits the following three strategic options in order to gain competitive advantage: cost reduction, quality enhancement and innovation?
a. David Farnham b. Michael Porter c. David Guest d. David Porter
Consider the following: CF NowRisk-free rate in the United States0.04/yearRisk-free rate in Australia0.03/yearSpot exchange rate1.67 A$/$What should be the proper futures price for a 1-year contract?
A. 1.686 A$/$ B. 1.703 A$/$ C. 1.778 A$/$ D. 1.654 A$/$ E. 1.638 A$/$