What is the percentage change in target shareholder wealth

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Reference no: EM13294160

What are the steps to solving this problem?: The balance sheet for the Raider Company shows Total assets of $12,800 financed by $4,900 of Debt and $7,900 of Stockholders' equity. For the Target Company Total assets of $4,500 are financed by $1,900 of Debt and $2,600 of Stockholders' equity. The Raider Company plans to takeover the Target Company. The Raider Company has 620 common shares outstanding, their equity price-to-book ratio is 4.00, and their price-to-earnings ratio is 28.2. The Target Company has 610 common shares outstanding, their equity price-to-book ratio is 0.90, and their price-to-earnings ratio is 12.1. The Raider Company offers 1 share(s) of Raider stock to Target shareholders that tender 10 Target shares (the exchange ratio is 0.100000; assume fractional shares can be exchanged). Suppose tax effects and synergistic gains and losses equal zero; that is, accumulated sales, costs, and profits remain the same. After the Raider takes control of all Target shares, what is the percentage change in Target shareholder wealth?

Reference no: EM13294160

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