Question

Acqura Co is thinking fo a merger with Targeta Co. Acqura share price is $25, Targeta share price is $10 per share. Acqura has 1000 mill. and Targeta has 500 mill. shares outstanding. The total value of the merged firm is estimated as $32000 mill.

Q1. Acqura has offered to buy all Targeta shares for the cash amount of $8000 mill. This means the NPV of the merger for Acqura shareholders would be ($ mill.)

a) 0

b) -1000

c) 2000

d) 4500

Q2. The maximum amount of Acqura shares that Acqura shareholders should offer to Targeta shareholders is closest to (mill)

a) 500

b) 120

c) 55

d) 280

Answer 1