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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)?
