QUESTION 4 (a) XYZ Ltd is analysing the possible acquisition of ABC Group. The current market value of xyz Ltd is K8 million and ABC Group Pty Ltd is K6 million. It is estimated that the merger will generate a total annual after-tax cash flow of K1 million. The appropriate discount rate is for the incremental cash flow is 10%. Two offers are proposed: 1. Offer 50% of its shares 2. K6.5 million in cash. What is the cost of each alternative? What is the NPV of each alternative? ii) iii) Which alternative should XYZ use? i)
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- Consider the following information for the two companies, SpaceC and Alexa: SpaceC Alexa Shares outstanding 100 50 Price per share $50 $30 SpaceC is considering acquiring Alexa. It estimates that in doing so the synergistic benefit would be $200. Alexa says that it would accept an offer to be sold at $35 per share. Should SpaceC proceed and purchase Alexa? At what price would SpaceC be indifferent to making the acquisition of Alexa? Assuming the acquisition was at $35, what level of synergies (not $200) would there have to be to make the acquisition make sense for SpaceC? ( explain perfectly with step by step and type the answers) .Part 1 and Part II are independent. Please answer both parts. Part I: You are advising company ABC on its merger and acquisition case. The buyer company offers ABC two options. Option #1= $100 million cash at the acquisition date. Option #2 = $25 million cash at the acquisition date and another additional $90 million AFTER one year. The management team of ABC perceives a 30 percent annual discount rate. Which option should ABC choose? Show your work. Part II: What is the definition of internal rate of return (IRR) (it is efficient to write down the formula)? What are the given information and what is the unknown variable?URGENT Consider the following information for two all- equity firms, Firm Attrex and Firm Maliwan: Attrex Maliwan Shares 4800000 175000 outstanding Marketprice 30.83 371.43 per share Attrex estimates that the value of the synergistic benefit from acquiring Maliwan is yearly positive Cash Flow of $1,085,000 in perpetuity. Maliwan has indicated that it would accept a cash purchase offer of $525.715 per share. Attrex is thinking about offering 38% of their shares in exchange. How should Attrex proceed?
- he NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $ 64 per share, and LE is trading for $ 13 per share, implying a pre-merger value of LE of approximately $ 6.7 billion. If the projected synergies are $ 2.07 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV? Question content area bottom Part 1 The maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV is enter your response here. (Round to three decimal places.)Assume a company has 12,5 million shares in issue. The current market price per share is R65 per share. The company has the opportunity to invest in a project with a total value of R45 million. The net present value of the project is R35 million. What will the companies share price be if capital markets fully reflect the value of undertaking the project? 1. R67,50 02. R67,80 O 3. R65 O 4. R68Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? What is the net present value under the share offer?
- Merger Valuation with the CAPV Model Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has 1 million shares outstanding and a target capital structure consisting of 30% debt; its current beta is 1.60 (i.e., based on its target capital structure). Vandell’s debt interest rate is 7.7%. Assume that the risk-free rate of interest is 4% and the market risk premium is 8%. Both Vandell and Hastings face a 40% tax rate. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.6 million, $2.7 million, $3.4 million, and $3.62 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $10.73 million in debt (which has a 7.7% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.6 million each year for Years 1, 2, and 3. After…Tom Corporation is considering the acquisition of Jerry Corporation. Jerry Corporation has free cash flows to debt and equity holders of $3,750,000. If Tom Corporations acquires Jerry Corporation, Jerry will reduce operating costs by $1,500,000. This will increase free cash flow to $4,900,000. Assume that cash flows occur at year-end and the weighted average cost of capital is 9%. a. What is the value of Jerry Corporation without a merger? o. What is the value of Jerry Corporation with the merger?Consider 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 Price per share 6,000 1,200 $ 47 $ 17 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,500. a. If Firm T is willing to be acquired for $19 per share in cash, what is the NPV of the merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $19 per share in cash, what is the merger premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for…
- Merger Valuation with the CAPV Model Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has 1 million shares outstanding and a target capital structure consisting of 30% debt; its current beta is 1.60 (i.e., based on its target capital structure). Vandell’s debt interest rate is 7.7%. Assume that the risk-free rate of interest is 4% and the market risk premium is 8%. Both Vandell and Hastings face a 40% tax rate. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.6 million, $2.7 million, $3.4 million, and $3.62 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $10.73 million in debt (which has a 7.7% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.6 million each year for Years 1, 2, and 3. After…Consider 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 4,600 1,000 Price per share $ 40 $ 14 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,800. If Firm T is willing to be acquired for $16 per share in cash, what is the NPV of the a. merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) What will the price per share of the merged firm be assuming the conditions in b. (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If Firm T is willing to be acquired for $16 per share in cash, what is the merger c. premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for…Acquiring Corp. is considering a takeover of Takeover Target Inc. Acquiring has 10 million shares outstanding, which sell for R40 each. Takeover Target has 5 million shares outstanding, which sell for R20 each. If the merger gains are estimated at R25 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders?