Calculate the cost of stock alternative

Assignment Help Financial Management

Reference no: EM132071963

JH Bhd. is contemplating the acquisition of KI Sdn Bhd. The values of the two companies as separate entities are RM10 million and RM5 million, respectively.

JH estimates that by combining the two companies, it will improve the overall profitability by RM300,000 per year in perpetuity.

There are two methods of acquisition:

(i) JH can either pay RM6 million cash to KI; or (ii) offer KI a 40% holding in JH. The opportunity cost of capital is 15%.

(a) Calculate the gain from merger.

(b) Calculate the cost of the cash offer.

(d) Calculate the NPV of the acquisition under the cash offer and under the stock offer.

Reference no: EM132071963

Questions Cloud

Explain the function of layer of the internet model : Specify the operating systems and application software required for data communication between the clients and servers for each department. Justify your answer.

Venture capitalist-backed firms are less likely to encounter : “Venture capitalist-backed (VC-backed) firms are less likely to encounter agency problems and financial difficulties than non-VC-backed firms”

Explain the important points of the central limit theorem : Explain the important points of the central limit theorem. The response must be typed, single spaced.

The qualitative and quantitative research questions : Contrast at least two (2) differences between qualitative and quantitative research questions.

Calculate the cost of stock alternative : Calculate the gain from merger. Calculate the cost of the cash offer. Calculate the cost of stock alternative.

Discuss the environmental processes : Research children's health issues, focusing on environmental factors and links to poverty. The assessment of environmental processes includes agents.

What is the standard task time for the operation : a) What is the standard task time for the operation? What is the average completion time per unit?

The importance of assessment and evaluation : How the material covered throughout this course has helped them to acquire a greater knowledge of the usefulness and importance of assessment.

What actions should she take to improve the likelihood : Jessica Cruz has been the Department Manager for three years, and recently hired Mr. Smith as an entry-level employee in the Operations Section of her departmen

User Account

All Pages