A companyy is planning an acquisition

Reference no: EM13686134

A companyy is planning an acquisition. before the acquisition the normal expected outcomes for the firm was were as follows
ECONOMY OUTCOMES PROBABLITY
Recession $20,000,000 30% or .3
Normal 40,000,000 40% or .4
Strong 60,000,000 30% or .3

After the acquisition the expected outcomes for the firm would be
ECONOMY OUTCOMES PROBABILTY
Recession $10,000,000 .3
Normal 40,000,000 .4
Strong 80,000,000 .3

a. compute the expected return or value, standard deviation and the coefficient of variation before the acquisition
(please check ASSIGNMENT 7 for how to do the expected return, standard deviation and coefficient of variation)
b. after the acquisition these values are as follows:
EXPECTED VALUE WILL BE 43,000,000
STANDARD DEVIATION WILL BE 27,200,000
COEFFICIENT OF DEVIATION .633
Do you think this acquisition is desireable?? Why, Why not??
c. Do you think the company's stock price should go up after the acquisition? Why, why not?
I tried to solve it but the teacher didn't offer any notes or guide.

Reference no: EM13686134

Questions Cloud

What is the firm''s after-tax cost of debt : What is the firm's after-tax cost of debt?

What happens to the production possibilities frontier : Where would you plot unemployment on a production possibilities frontier? Where would you plot full employment on a production possibilities frontier? Now presume that is a time of crisis everyone pitches in and works much harder than usual. What hap..

A consumers reservation price is the price : A consumer's reservation price is the price at which a:

Spends more on rent-seeking activities than customers : Which of the following explains why big business typically spends more on rent-seeking activities than customers?

A companyy is planning an acquisition : A companyy is planning an acquisition.

Auctioneer who is selling an item through an auction : Consider an auctioneer who is selling an item through an auction. It is known that the 25 risk-neutral bidders have affiliated values that are distributed among $0 and $500 million. Based on this information, the auction type that will maximize expec..

Costs of producing an intermediate product : If a company adds up all the costs of producing an intermediate product-direct labor, materials, and overhead - to establish a transfer price, then it is using:

State the rule for optimum input allocation to produce : State the rule for optimum input allocation to produce a given level of output at the lowest possible cost -when two inputs are variable and the prices of the inputs are given- and describe why it makes sense

Negotiated by two monopolists-one representing patients : When medical fee schedules are negotiated by two monopolists-one representing patients and one representing providers-the equilibrium medical fees will

User Account

All Pages