Box plc is considering the acquisition of circle plc

Assignment Help Financial Management

Reference no: EM131072070

Box plc is considering the acquisition of Circle plc. The former is valued at £100m and the latter at £50m by the market.

Economies of scale will result in savings of £2.5m annually in perpetuity. The required rate of return on both firms and the combination is 11 per cent.

The transaction costs will amount to £1m.

A. What is the present value of the gain form the merger?

B. If a cash offer of £70m is accepted by Circle's shareholders what is the value created for Box's shareholders?

C. If shares are offered in such a way that Circle's shareholders would possess one-third of the merged entity, what is the value created for Box's shareholders?

Reference no: EM131072070

Questions Cloud

Proportional income tax does not satisfy horizontal equity : A TV pundit claims that a proportional income tax does not satisfy horizontal equity, because it places different burdens on individuals with the same lifetime income:

Calculate SmartTags WACC : Company xyz expects to generate FCFs of $15 M next year. This will grow for 5 years at 12%, after which the company will continue to grow at the risk-free rate of 2%. Calculate SmartTag’s WACC. Using a DCF valuation, determine the enterprise value fo..

Create butterfly spread strategy : First, create a butterfly spread strategy using these options. (1) $190 call priced at $11.51 , (2) $200 call priced at $8.22 and (3) $210 call priced at $7.55. Calculate the rate of return (in %), when the underlying stock price becomes $200. (margi..

Calculate the cash collection : Month Sales $ Month Sales $ Jan 44,202 July 20,562 Feb 19,221 Aug 25,659 Mar 25,659 Sep 44,202 Apr 20,562 Oct 25,659 May 44,202 Nov 19,221 June 19,221 Dec 20,562 Sales are collected as follows: In the month of Sales: 40% In the next month: 33% After ..

Box plc is considering the acquisition of circle plc : Box plc is considering the acquisition of Circle plc. The former is valued at £100m and the latter at £50m by the market. What is the present value of the gain form the merger? If a cash offer of £70m is accepted by Circle's shareholders what is the ..

Unaffected by firm choice of debt and equity financing : Match each of the following definitions to the appropriate terms: Terms (1- independence theory with corporate taxes,2- independence theory- no taxes, 3- saucer-shaped cost of capital curve), Definitions (A- The Cost of capital is unaffected by the f..

Health system managers are also working on their budgets : The Metropolis Health System managers are also working on their budgets for next year. Each manager must annualize his or her staffing plan, and thus must convert staff net paid days worked to a factor. Medical Records is an outsourced department so ..

Large plc is considering the takeover of small plc : Large plc is considering the takeover of Small plc. Large is currently valued at £60m on the stock market while Small is valued at £30m. The economies of scale and other benefits of the merger are expected to produces. Does this merger create value f..

Differences among domestic and alien types of corporation : Analyze and report the importance of each of the following elements in forming a corporation. Corporation as a Legal Person. Differences among Domestic, Foreign, and Alien types of corporations. Selecting a name for a corporation. Selecting a state t..

User Account

All Pages