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What is the incremental value of the acquisition

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Aqua Ltd. is considering making an offer to takeover Mars Ltd. Aqua can either make a cash offer of $25 per share or a stock offer of 20,000 of its shares in exchange for the outstanding shares of Mars. The value of Mars to Aqua is expected to be $1.6 million. Aqua has a market value of $6 million and its shares are trading at $40 per share. Mars has 50,000 shares outstanding with a share price of $15.

Required:

(a) What is the incremental value of the acquisition?

(b) Should Aqua make a cash offer or stock offer?

(c) The market currently estimates that there is 60% probability that Aqua will acquire Mars. What will be the market value of Aqua immediately after the announcement of the acquisition?

(d) Other than synergy, state any two (2) managerial motives for mergers and acquisitions

Reference no: EM132785184

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