Sweet Cola Corp. (SCC) is bidding to take over Salty Dog Pretzels (SDP). SCC has 2,000 shares outstanding, selling at $40 per share. SDP has 1,000 shares outstanding, selling at $16.50 a share. SCC estimates the economic gain from the merger to be $16,000.
a. If SDP can be acquired for $19 a share, what is
the NPV of the merger to SCC?
b. What will SCC sell for, per-share, when the
market learns that it plans to acquire SDP for $19 a share?
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)
c. What will SDP sell for?
d. What are the percentage gains to the
shareholders of each firm? (Do not round intermediate
calculations. Enter your answers as a percent rounded to 2 decimal
places.)
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