Considering the correlation of your firm and western cos

Reference no: EM13616185

Your firm is considering purchasing a smaller firm, Western Co. Analysts project that the merger will result in incremental free flows and interest tax savings with a present value of $72.52 million, and they have determined that the appropriate discount rate for valuing Eastern Co. as a stand alone firm is 16 percent.

currently has 380 Million Shares Outstanding

Max share price offere = $18.13

Exchange Ratio = 0.4

Considering the correlation of your firm and Western Co's cash flow is -.19, does this change your answer? How should your firm finance this acquisition?

Reference no: EM13616185

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