What is minimum amount should bid per share

Assignment Help Financial Management

Reference no: EM131550934

X Corporation is interested in acquiring Y Corporation. Y has 1 million shares outstanding and a target capital structure consisting of 20% debt. Its debt interest rate is 8%. Assume that the risk-free rate of interest is 3% and the market risk premium is 8%. Both X and Y face a 40% tax rate.

Y free cash flow is $5 million and is expected to grow at a constant rate of 3% per year; its beta is 0.9. If Y has $4.15 million in debt and X wants to bid at least 10% higher than Y's current stock price to increase the likelihood of shareholders accepting the merger, what is minimum amount X should bid per share?

Reference no: EM131550934

Questions Cloud

Issues bond-what happens to the excess : X Corp issues a bond on March 1, 2014 with a maturity date of February 28, 2024. what happens to the excess?

Economic value added of capital one financial corporation : Please analyze the economic value added of Capital One Financial Corporation (COF).

What are npv and irr : A product line can sell 80.000 products per year for 4 years. The required rate of return is 10%. Tax rate is 40%. What are the NPV and IRR?

Fractional shares of stock cannot be purchased : What is company's value of operations and how many shares will remain after repurchase, assuming that fractional shares of stock cannot be purchased?

What is minimum amount should bid per share : what is minimum amount X should bid per share?

Cash flows-irr and npv for an individual owner : Calculate the Cash Flows, IRR & NPV for an Individual Owner (Head of Household).

Wacc for last dollar raised to complete the expansion : What is the WACC for the last dollar raised to complete the expansion?

Trader buys call option with strike price : A trader buys a call option with a strike price of $20 and a put option with a strike price of $25.

What profit or loss would the bank incur : What profit or loss would the bank incur if the issue were sold to the public at these terms?

User Account

All Pages