Market value of the combined company

Assignment Help Finance Basics
Reference no: EM132566085

Company A has 50 million outstanding shares at a price of $3. Company B has 30 million outstanding shares at a price of $2. A proposed merger between them seems likely to increase the standard deviation of their equity returns from 30% individually to 50% combined. However, this merger is expected to generate an operating synergy of $50 million. What would you expect the market value of the combined company to be after the merger? Assume the CAPM assumptions hold. Explain carefully.

Reference no: EM132566085

Questions Cloud

Technology acceptance model : The role of technology leadership incorporates with the Technology Acceptance Model (TAM).
Provide journal entries for the adjusting events : Assuming each of the above events is material, Provide journal entries for the adjusting events for the year ended 30 June 2020
Constructing a financial model : Articulate what enterprise value (EV) is and why it is necessary to consider EV when constructing a financial model
Explain how you would conduct a job analysis in a company : Explain how you would conduct a job analysis in a company that has never had job descriptions. Utilize the O*Net as a resource for your information.
Market value of the combined company : Company A has 50 million outstanding shares at a price of $3. Company B has 30 million outstanding shares at a price of $2.
Discuss different ways to structure and organize it teams : Discuss different ways to structure and organize IT teams or departments. Why might it not be worth changing?
What elements are tangible vs intangible : What elements are tangible vs. intangible? How do the tangible vs. intangible components contribute to your satisfaction or dissatisfaction with the consumption
Discuss the difference in value of two stations : Discuss the difference in value (if any) of these two stations. Assume that the cash flow is relatively stable.
Determine the basic EPS amount : The basic earnings per share for the period ended 30 June 2018 was $1.50 per share. Determine the basic EPS amount

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd