Shareholders in exchange for their shares

Assignment Help Financial Management

Reference no: EM132031701

1. Consider two firms, CompanyB and CompanyC, both with earnings of $10 per share and 5 million shares outstanding. CompanyC is a mature company with few growth opportunities and a stock price of $25 per share. CompanyB is a new firm with much higher growth opportunities and a stock price of $40 per share. Assume CompanyB acquires CompanyC using its own stock and the takeover adds no value. In a perfect capital market, how many shares must Bob offer CompanyC's shareholders in exchange for their shares?

A) 0.625 B) 1 C) 0.3846 D) 1.6

2. A stock increased from $50 to $57. If the risk premium of the stock is 10%, what is the rate of inflation if the real risk-free rate is 1.5%?

A. 1.2% B. 1.9% C. 2.5% D. 2.9% E. 3.4%

Reference no: EM132031701

Questions Cloud

How much would you pay for a share of long live today : Similar stocks are earning a return of 10%. How much would you pay for a share of Long Live today?

What are the implications of liquidity on asset pricing : What is the expected return on Healthy Eating's stock? What are the implications of liquidity on asset pricing ?

What is the yield on one-year t-bill : What is the yield on a 1-year T-bill? With the growth of online retailing, where do you see the future of Brick and Mortars?

What is the real dividend yield for the investment : An investment has a current price of $92 and has paid a $5 dividend over the holding period. what is the real dividend yield for the investment?

Shareholders in exchange for their shares : In a perfect capital market, how many shares must Bob offer CompanyC's shareholders in exchange for their shares?

What is american actual true cost of hedging : what is American's actual true cost of hedging if the spot rate at the end of 90-days is $1.73/£?

Cost of capital for layton motors : You have recently been hired by Layton Motors, Inc. (LMI), in its relatively new treasury management department.

What is the price of bonds and yield to maturity : Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. What is the price of the bonds? What is their yield to maturity?

What is the default risk premium on corporate bond : Assume that the liquidity premium on the corporate bond is 0.3%. What is the default risk premium on the corporate bond?

User Account

All Pages