Calculate the market price per share

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Reference no: EM132824312

QUESTION - Rainbow Berhad is analysing the possible acquisition of Pearl Berhad. Rainbow Berhad plans to acquire Pearl Berhad at RM3.50 per share with an estimated synergy of RM500,000.00. Below is the other relevant information before the acquisition:

 

Rainbow Berhad

Pearl Berhad

Market price per share (RM)

5.00

2.00

Number of shares outstanding (units)

330,000

240,000

REQUIRED -

i. Identify the merger premium per share for the proposed cash acquisition.

ii. Calculate the market price per share and net present value under cash acquisition.

iii. Calculate the market price per share and net present value under stock acquisition. Assume Rainbow Berhad offers two of its shares for every four of Pearl Berhad's shares.

iv . Recommend to the company whether to acquire based on cash basis or stock basis. Give justification.

Based on the company you selected for your group assignment, discuss two (2) possible benefits of derivatives on the selected company. Give appropriate examples.

Reference no: EM132824312

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