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Estimated market value of the combined companies

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Reference no: EM133005043

The Jupiter Corporation is acquiring the Sumoto Corporation. Neither firm has any debt outstanding. Jupiter has 200 million shares of stock outstanding with a market price of $16 per share. Sumoto has 80 million shares of stock outstanding with a market price of $6 per share. Jupiter's advisors estimate the benefits of synergy to have a present value of $90 million.

a. What is the estimated market value of the combined companies?

b. Suppose Jupiter pays $540 million in cash to buy 100 percent of the common stock of Sumoto. What is the NPV of the merger?

c. If Jupiter offers 15% of the combined firm's stock to Sucmoto's shareholders, what is the NPV of the merger?

Reference no: EM133005043

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