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Alina [70]
3 years ago
11

Three Guys Burgers, Inc., has offered $18 million for all of the common stock in Two Guys Fries, Corp. The current market capita

lization of Two Guys as an independent company is $15.9 million. Assume the required return is 8.1 percent and the synergy from the acquisition is a perpetuity.
What is the minimum annual synergy that Three Guys feels it will gain from the acquisition?
Business
1 answer:
Pavlova-9 [17]3 years ago
3 0

Answer:

Annual synergy gain = $ 178,500

Explanation:

Value of synergy gain from acquisition = 18 - 15.9 = 2.1 million

Annual synergy gain = 2.1 *.085 = .1785 million or $ 178,500

Annual synergy gain = $ 178,500

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Answer:

She needs $150,000 to fund this perpetuity.

Explanation:

In this question we need to find the present value of this perpetuity. Because this is a growing perpetuity we will need to use the formula of present value of a growing perpetuity.

PV of growing perpetuity = Payment/ R-G

The payment is the current payment the perpetuity will pay which is 6,000, R is the interest rate which is 10% and G is the growth rate of the perpetuity which is 6%. Now we will input these values in the formula in order to find the present value of the perpetuity.

6,000/0.1-0.06

=6,000/0.04

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Unfortunately cutting or reducing production, or reengineering at all.

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The supply curve of the firm is an upward sloping curve, which shows that quantity increases as price increases.

So, in relation to this, it means that MC will also increase as quantity increases.

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