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QUESTION

For the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding.

For 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 Firm T

Shares outstanding 6,600 2,500 

Price per share $47  $21 

Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,900.

a. If Firm T is willing to be acquired for $23 per share in cash, what is the NPV of the merger? (

NPV     $ _________

b. What will the price per share of the merged firm be assuming the conditions in (a)? (

Share price     $ _________

c. If Firm T is willing to be acquired for $23 per share in cash, what is the merger premium? (Not round intermediate calculations.)

Merger premium         $ ____

d. Let say Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? 

Price per share         $ _____

e. What is the NPV of the merger assuming the conditions in (d)? 

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