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Determining the exchange ratio of shares

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Question:

1. Considering the follow premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding.

Firm B Firm T

Shares outstanding 5,400 1,300

Price per share $ 53 $ 23

A firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $7,900. Firm T can be acquired for $25 per share in cash or by exchange of stock wherein B offers one of its shares for every two of T's shares.

Throughout such exchange ratio of B shares to T shares would the shareholders in T be indifferent between the two offers? (Not round intermediate calculations and round your answer to 4 decimal places)

Exchange ratio _____ to 1

Reference no: EM132118755

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