Four defensive tactics that are used to fight a takeover

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Gold Ltd is considering the possibility of acquiring Silver Ltd. Both companies are unlevered (have no debt). Gold Ltd believes that the acquisition will increase its total after tax annual cash flows by N$4.2 million indefinitely. The current market value of Silver Ltd is N$80 million, and that of Gold Ltd is N$145 million. The appropriate discount rate for the incremental cash flows is 12%. Gold Ltd is deciding whether it should offer 45 per cent of its share or N$98 million in cash to Silver Ltd's shareholders.

Required:

(a) What is the cost each alternative?

(b) What is the NPV of each alternative?

(c) Which alternative should Gold Ltd take?

(d) Explain briefly, any four defensive tactics that are used to fight a takeover.

Reference no: EM132608961

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