What is the npv of the merger for cartel corporation

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Cartel Corporation is acquiring the Superior Corporation. Neither firm has any debt outstanding. Cartel has 150 million shares of stock outstanding with a market price of $30 per share. Superior has 100 million shares of stock outstanding with a market price of $14 per share. Cartel's advisors estimate the value of synergy today to be $120 million.

Problem a. What is the estimated market value of the combined companies?

Problem b. Suppose Cartel pays $1.5 billion in cash to buy 100 percent of the common stock of Superior. What is the NPV of the merger?

Problem c. If Cartel offers 20% of the combined firm's stock to Superior's shareholders, what is the NPV of the merger?

Reference no: EM132718000

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