What is the merger premium per share

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1. Stock A has an expected return of 19 percent and a beta of 1.6. Stock B has an expected return of 11 percent and a beta of 0.8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?

2.26 percent

3.00 percent

4.50 percent

1.77 percent

2. Miller Sporting Goods is acquiring Town Line Sports for $327,000 in cash. Currently, Miller Sporting Goods has 12,500 shares of stock outstanding at a market price of $54 a share. Town Line Sports has 12,000 shares outstanding at a price of $26 a share. Neither firm has any debt. The incremental value of the acquisition is estimated to be $16,500. What is the merger premium per share?

Reference no: EM132067306

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