What will be the price per share of the merged firm

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Rubicon LLC announced a bid to take over Minas Gerais Pty Limited. Rubicon LLC has 3 million shares outstanding, selling at $15 per share. Minas Gerais Pty Limited has 2 million shares outstanding, selling at $7.50 per share. Rubicon LLC estimated the potential economic gain form the merger to be $5,000,000.

i. If Minas Gerais Pty Ltd could be acquired for $9 per share, what is the NPV of the Merger to Rubicon LLC?

ii. What will Rubicon LLC shares sell for when the market learns that it plans to acquire Minas Gerais Pty Ltd for $9 per share? What will Minas Gerais Pty Ltd shares sell for? What are the percentage gains to the shareholders of each firm?

iii. If instead of a cash payment Rubicon LLC acquired Minas Gerais Pty Ltd through a share exchange what would be percentage gains if: for each share in the Minas Gerais Pty Ltd shareholders receive 0.6 of one share in Rubicon LLC. What will be the price per share of the merged firm?

iv. What is the NPV of the merger to Rubicon LLC when it uses an exchange of shares? If your answer differs explain why this is so.

Reference no: EM132569582

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