TJ's and Corner Grocery are all-equity firms. TJ's has 2,500 shares outstanding at a market price of $16.70 a share. Corner Groc
1 answer:
Answer:
$1.30
Explanation:
The valuation of TJ's = price per share * number of shares in issue
= $16.70 * 2,500 shares = $41,750.
Corner Grocery offer for TJ's of $45,000, and obviously a premium over the market value of TJ's at $41,750.
The price per share of Corner Grocery's offer = = $18 per share.
That is, offer value divided by the number of shares to be acquired.
Therefore, merger premium per share = offer price, less market price
= $18 - $16.70.
= $1.30
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Complete Question
The complete question is shown on the first uploaded image
Answer:
The correct option for first question is A
The correct option for second question is B
Explanation:
The correct option is A because the value of a firm depends on its ability to generate cash flow that is available to distribute to the company's investors, including creditors and stockholders.
For the second part the answer is B
This because a financial asset will have value only if it can generate future positive cash flows.
Also when valuating the cost at which the asset is acquired is not relevant
