Question

You are analyst who is hired to estimate a takeover price for a potential acquisition. Based...

You are analyst who is hired to estimate a takeover price for a potential acquisition. Based on the comparable analysis you compute a stock price of $25 for Target X. Based on a database of recent takeover transactions, Target A’s pre-takeover price was $15 and the acquisition price was $22. In addition, Target B had a pre-takeover price of $36 and an acquisition price of $39. What is the estimated takeover price for this acquisition of Target X?


A. $25


B. $30


C. $32


D. $34

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Homework Answers

Answer #1

Calculation of Estimated Aquisition Price :

Target A :

Pretakeover Price : $15

Aquisition price : $22

Target B :

Pretakeover Price : $36

Aquisition price : $39

Average excess estimation cost over per $ pretakeover price :

(Target A Aquisition price + Target B Aquisition price) / ( Pretakeover Price A + Pretakeover Price B):

($39 + $22) / ($15 + $36) = 1.1961

So estimated Aquisition Price For Target X:

Pretakeover Price * 1.1961 = $29.9 or $30


So correct answer is Option B.

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