(33*15+50*35)/(12+35) = 47.77/share in the combined company
premium = 47.77*12 - 33*15 = 78.2
(33*15+50*35+105)/(12+35) = 50/share in the combined company
premium = 50*35 - 50*35 = 0
I am 100% sure that one of you saying that you’re 100% sure is wrong…
I chose 78 and 27. I’m pretty sure you need to calculate it using the pre merger market values, calc. as (stock price * no. of shares). It was straight from the curriculum…can’t go wrong with that.
I agree with ymc, except I did Q2 a lil different, but same answers
I also agree with ymc.
the point is that the first question assumed NO synergies while the second DID assume synergies. so you definitely cannot do the 100-27=78 or the 105-0 = 105 to answer both questions.
two different scenarios…at least two questions i am confident about…
i think the issue is that they were 2 seperate scenarios….
i got 78 and 0
The answer to the second question was 100% zero.
well let’s go to the question referring to the reasoning behind the stock use instead of cash? i put because the stock was overvalued, anyone?????????????????????????????????????????
richsg21.. i agree
If the synergy is zero (Q1), the acquirer’s gain is -78 if you think about it. If the synergy is >0, the acquirer has to share it with the target by S - (Pt - Vt). Only in this case though, Pt is actually Pat (the merged share price).
When calculating the merged stock price, you don’t add synergy.
> is there an answer like this:
> Acquirer’s stock is overvalued compared to the
Yes I put the same answer for this along with 105 and 0
Join the world's largest online community of CFA, CAIA and FRM candidates.
No thanks, I don't want to increase my probability of passing.