Reference no: EM132944975
Question - The firm Amble is entirely financed by equity. It has 4 million shares and a current share price of $8. It is public knowledge that the firm's current management is inefficient and the firm's share price would be $11 if well managed. Amble's shares are owned entirely by small shareholders. The administrative costs to acquire Amble would be $0.14 million. An acquirer can gain control of the firm and manage it efficiently if they can purchase at least 51% of its shares. Assume the market is semi-strong form efficient.
a) Lawson, an entrepreneur, can secretly buy 5% of Amble's shares at the current market price, then make a public bid for a further 46% of the total number of shares at $11 each. What is Lawson's profit? Will the takeover go ahead? Explain.
b) Assume that Lawson implements the strategy described in part (a). Amble has made a provision that when a potential acquirer reaches a holding of 16% of its shares, all shareholders except the acquirer will be able to buy one new share in Amble for each share they own at a 40% discount off the current market price. The market believes that Lawson will take control and you can assume a current market price of $11 to start with.
(i) How many new shares will be issued?
(ii) After the provision has been triggered, what will be the market price of a share in Amble? What will be the value of Lawson's shareholding in Amble?
(iii) Will the takeover go ahead? Explain.
c) Identify and briefly explain an alternative strategy Lawson might use to implement an efficient takeover of Amble.
d) How might the existence of a large shareholder potentially affect a firm's market value? Explain.
What the total issue price of the bonds
: On January 1, 2012, Haley Co. issued ten-year bonds with a face amount of P4,000,000. What the total issue price of the bonds
|
What is the total cost of the machine
: Orange Company uses many kinds of machines in its operations. Labor of testing machine 40,000. What is the total cost of the machine
|
How much of the cash must Albert receive
: The noncash assets are sold for P 800,000, with P 210,000 of this amount being used to pay liquidation expenses. How much of the cash must Albert receive
|
What will be the change in wealth for a shareholder
: What will be the change in wealth for a shareholder who had 1000 shares in Mayo before the rights issue? Why? Will the rights issue succeed? Explain
|
How many new shares will be issued
: The firm Amble is entirely financed by equity. It has 4 million shares and a current share price of $8. How many new shares will be issued
|
What would a statement of cashflows look like
: Bonds payable (maturing in 2021) in the amount of $30,000 were retired by paying $28,000 cash. What would a statement of cashflows look like
|
Prepare schedule for the division of net profit
: Salaries of P1,200 per month to each partner; Prepare schedule for the division of net profit for 2021 with supporting computations when appropriate
|
What the resulting effect on the statement of profit or loss
: Given the opening capital of RM71,000, closing capital as RM137,600 and drawings as RM5,000, what the resulting effect on the statement of profit or loss
|
Construct a table to show the amount of depreciation
: Construct a table to show the amount of depreciation should be recorded each year during the lifetime of the machine
|