What assumptions are necessary to exploit this opportunity

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Reference no: EM131973375

Suppose Tork-Tick technology have two subsidiaries, Bubble Tech and Burst Tech. These two subsidairies have identical assets that generate identical cash flows. Bubble tech is all financed by equity. The stock price is 23USD per share with 11 million outstanding. Burst tech has 15 million shares outstanding as well as debt of 75.90 million USD.

1. If the captal market is perfect, what is the stock price for Burst Tech?

2. Suppose Burst Tech stock currently trades for 13.55 per share, what arbitrage opportunity is available?

3. What assumptions are necessary to exploit this opportunity?

Reference no: EM131973375

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