Merger takes place between two companies to form single firm

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When a merger takes place between two companies to form a single firm, the target company does not continue to operate as a separate identity. Consider the following scenario: Tako Pictures Inc. is considering an acquisition of Zebra Engineering Corp. (ZEC), and estimates that acquiring ZEC will result in incremental after-tax net cash flows in years 1-3 of $15.0 million, $22.5 million, and $27.0 million, respectively. After the first three years, the incremental cash flows contributed by the ZEC acquisition are expected to grow at a constant rate of 3% per year. Tako's current beta is 0.40, but its post-merger beta is expected to be 0.52. The risk-free rate is 5%, and the market risk premium is 7.10%. Based on this information, complete the following table by selecting the appropriate values: Zebra Engineering Corp. (ZEC) has 6 million shares of common stock outstanding. What is the largest tender offer take Pictures Inc. should make on each of Zebra Engineering Corp. (ZEC)'s shares? $72.42 $86.90 $57.94

Reference no: EM131870782

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