How would value the deal today from the perspective

Assignment Help Financial Accounting

Reference no: EM132771293

XYZ has made the following offer to buy Little Genius. In 6 months time if XYZs stock price is between 40 and 50 Little Genius can exchange one of its shares for 50 dollars. If the price is below 40, however, then Little Genius will receive 1.25 times the share price of XYZ in 6 months. On the other hand if the XYZ's stock price is above 50 then ABD can exchange 1 share of Little Genius for the dollar price of one share of XYZ.

Problem (a) Explain how you would value the deal today from the perspective of an Little Genius shareholder. Provide significant details of all the steps that you would go through to come up with an exact number. Now assume the stock price of XYZ is 45 dollars. The volatility is 28% per year. The risk free rate is 6% per year continuously compounded and the dividend yield is 2% per year continuously compounded. Value the deal.

Reference no: EM132771293

Questions Cloud

What are the mechanisms of horizontal gene transfer : What are the mechanisms of horizontal gene transfer in bacteria describing the manner in which the dna can be transferred from one cell to another

How the flow of communication affects organizational culture : Use at least one example from the list to discuss how communication flows in a department in your current organization or a previous one.

Determine which is the better option and by how much : Determine which is the better option and by how much? As a settlement for an insurance claim, Craig was offered one of two choices.

With what people or agencies would you work : With what people or agencies would you work in facilitating the proposed interventions and why? 150 words in length, address.

How would value the deal today from the perspective : How would value the deal today from the perspective of an Little Genius shareholder. Provide significant details of all the steps that you would go through

Prepare the acquisition analysis of Sunshine Ltd : On 1 July 2019, Sunshine Ltd acquired all of the assets and liabilities of Rain Ltd. Prepare the acquisition analysis of Sunshine Ltd at 1 July 2019

Find x and y so that the present value : Find $X and $Y so that the present value and duration of the zero coupon bond portfolio matches the present value and duration of the incoming cash flows.

What are the influences of inland waterways and outlets : Describe the four elements of geography: location, topography, climate, and natural resources - Discuss the importance of the country's location in political

Compute the margin of safety ratio for current operations : Crane Willis is advertising manager for Bargain Shoe Store. Compute the margin of safety ratio for current operations and after Crane's changes are introduced.

User Account

All Pages