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Shareholders in t be indifferent

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Reference no: EM133062155

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding.

Firm B Shares Outstanding: 5,200 / Price Per Share: $43

Firm T Shares Outstanding: 1,800 / Price Per Share: $18

Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,100. Firm T can be acquired for $20 per share in cash or by exchange of stock wherein B offers one of its shares for every two of T's shares.

At what exchange ratio of B shares to T shares would the shareholders in T be indifferent between the two offers?

Reference no: EM133062155

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