1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Novosadov [1.4K]
3 years ago
11

Firm Yahoo has attracted the attention of Firm Verizon because of its poor operating performance. Firm Verizon believes that the

way Firm Yahoo is managed is inefficient and that replacing the current management team would increase the cash flow of Yahoo by $25,000 every year up to perpetuity. Firm Yahoo has 50,000 shares outstanding and is not listed. Firm Verizon has 250,000 shares outstanding that are currently trading at $40/share. Firm Verizon already owns a 1% stake in Firm Yahoo. Firm Yahoo has two other shareholders, ABC and DEF. Both of them hold a 49.5% stake in Firm Yahoo. To change the management team, Firm Verizon needs to get control of Firm Yahoo (i.e., at least 50% of shares). Firm Verizon hires Levan Brothers, a prestigious investment bank, to get advice on the transaction. Levan Brothers estimates that the value of one share of Firm Yahoo under the current management team is $15 per share. They also advise Firm Verizon to pay a premium for the acquisition of Yahoo and to offer ABC and DEF $17 in cash for every share of Firm Yahoo. Fees charged by Levan Brothers to Firm Verizon are $6,000. Assume that there are no taxes and markets are perfectly efficient. The appropriate annual discount rate is 10%. (Note that Investment bankers usually receive a success fee, i.e., they are paid only if the transaction takes place i.e. their fees are NOT a sunk cost and the fee is typically paid by the acquiring firm.)
a) Compute the maximum price per share that Firm Verizon is willing to pay to acquire the remaining 99% of Firm Yahoo via an all-cash offer.

b) Compute ABC’s gains if it accepts the all-cash offer of $17/share.

c) ABC believes that DEF will accept the offer and tender its shares. What is the optimal strategy for ABC: accept the offer or decline the offer? Show your answer.

d) What will happen if DEF also believes that ABC will tender its shares? What is the minimum share price Firm Verizon should offer to ABC and/or DEF to avoid that?

e) Compute the gains or losses per share for Firm Verizon if an all-cash offer to acquire 99% of Firm Yahoo is made at a price of $20.

f) Under the assumption that ABC always believes that DEF will accept the cash offer (and vice versa), what is the likelihood that the inefficient management team is replaced some day? Explain.
Business
1 answer:
hichkok12 [17]3 years ago
7 0

Answer:

The answer is D

Explanation:

You might be interested in
On January 1, Applied Technologies Corporation (ATC) issued $550,000 in bonds that mature in 10 years. The bonds have a stated i
I am Lyosha [343]

Answer:

1. $550,000

Explanation:

1. It is given in the question that the stated interest rate and the market interest rate both are having the same rate, i.e, 12%.

Hence, the bonds are issued at the face value that is $550,000.

2. The Journal entries are as follows:

(i) On January 1,

Cash A/c      Dr. $550,000

To bonds payable               $550,000

(To record the bond issuance)

(ii) On December 31,

Interest Expense A/c   Dr.   $66,000

To cash A/c                                          $66,000

(To record the first interest payment on December 31 assuming no interest has been accrued earlier in the year)

Workings:

Interest expense = $550,000 × 12%

                             = $66,000

7 0
3 years ago
Royal Dutch Shell(RDS) acquires ethanol fuel from Brazilian Cosan energy company. The Ethanol costs 500 million Brazilian Real(B
Fudgin [204]

Answer:

The answer is 5000 future contracts

Explanation:

Solution

Given that:

Royal Dutch buys ethanol fuel from Brazilian energy company

Nowm,

The Required coverage = 500,000,000

The BRL/USD futures contract size = 100,000

Number of contracts required = 500,000,000/100,000

So,

= 500,000,000/100,000  = 5000

Therefore, the optimal number of BRL/USD futures contracts for Shell to take to receive the entire amount of Real at delivery is 5000

3 0
3 years ago
If logan received a​ $2,500 bonus and his mps is​ 0.20, his consumption rises by​ $________ and his saving rises by​ $________.
Anton [14]

if Logan received a $2,500 bonus and his mps is 0.20, his consumption rises by $2,000 and his savings rises by $500

7 0
3 years ago
Bob hasn't been managing his finances very well and is in need of an emergency loan to pay rent. On July 10, he goes to Cash4U f
Andrei [34K]

Answer:

APR = 669.17%

Explanation:

Cash 4U is charging $55 in interest for 6 days, that means it is charging Bob $9.17 in interest per day which is equivalent to 1.8333% daily interest. If we want to determine the APR we just have to multiply the daily interest by 365 days = 1.8333% per day x 365 days = 669.17%

3 0
3 years ago
On June 30, the board of directors of Sandals, Inc., declares and pays a 100% stock dividend on its 30,000, $1 par, common share
Gwar [14]

Answer:

The accounting entries is as follows:

Debit Retained Earnings($35 by 30,000 shares) $1,050,000

Credit: Common Shares Account at Par Value($1 by 30,000 shares)  $30,000

Credit Share Premium Account for Additional Paid in Capital ($34 by 30,000) = $1,020,000

Explanation:

A stock dividend is payment to shareholders by the company in the form of additional shares rather than dividend payment.  This is common where the company is short of liquid funds to effect payment of dividends to its shareholders. They are usually issues in the form of fractions of existing holdings. Stock dividend increases the overall share holdings of the shareholder.

For Stock Dividend, the accounting entry is to transfer from the Retained Earnings to the Share Account and Share Premium or Additional Capital account.

The Share account is credited with the par value of the additional shares issued while the difference between the par value and the market value is credited to the Share Premium account. The full amount of the stock dividend is likewise debited to the Retained Earnings account.

7 0
3 years ago
Other questions:
  • At the beginning of 2013, Barcroft Co. estimated that its total annual fixed overhead costs would amount to $25,000. Further, Ba
    14·1 answer
  • An aircraft factory manufactures airplane engines. The unit cost (the cost in dollars to make each airplane engine) depends on t
    11·1 answer
  • Which of the following statements is true of lead qualification? Group of answer choices It refers to a process that describes t
    15·1 answer
  • In an oligopoly situation, a wise marketing manager will probably set the firm's price level:
    12·1 answer
  • Which of the following claims best indicates the policy that the United States government followed toward business during World
    13·1 answer
  • P1 returns goods previously purchased on credit from P2.
    15·1 answer
  • Imagine that David is preparing his will and is trying to decide how to divide his assets between his two grown children. His da
    12·1 answer
  • What role does advertising play in monopolistic competition?
    7·1 answer
  • Which type of tax is based on the retail price of goods owned, possessed, or consumed within a state that were NOT purchased wit
    5·1 answer
  • What is a good way to use a cover letter to start a two-way conversation with a potential employer?.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!