What is the merger premium expressed

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Firm X and Firm Y are both 100% equity-financed. Firm X wants to acquire Firm Y for $165,000 in the form of either cash or stock. The synergy value of the deal is $25,000. You are given the following additional information:

FIRM X FIRM Y

Numbers of shares 20,000 9,750

Price per share $37.50 $15.00

a. What is the merger premium expressed as a percent of Firm Y's stock price? What is the NPV of the acquisition if cash is used?

b. What is the price per share of the post-merger firm following a cash acquisition?

c. What is the price per share of the post-merger firm if payment is made in stock?

d. What is the NPV of acquiring Firm Y when stock financing is used?

Reference no: EM132281364

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