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What is the value impact of this acquisition announcement

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Question - On Monday 2 Aug 2021, Afterpay and Square announced that Square has agreed to acquire all of the issued shares in Afterpay. Afterpay [ASX:APT] is a public company with stocks listed on the Australian Securities Exchange. You are provided with the following information about Afterpay and ASX200 index (a proxy for the market portfolio). Assume the daily risk-free rate is 0 and the CAPM holds.

 

Date Afterpay

ASX200

Closing price, Friday 30 July 21

$96.99

7392.62

Closing price, Monday 2 August 21

$114.8

7491.45

Number of outstanding shares

290.3 million shares

 

Stock beta

1.58

1

Required -

1. Use the CAPM to calculate Afterpay's abnormal return on 2 Aug 2021.

2. What's the value impact of this acquisition announcement on Afterpay's shareholder wealth?

3. Using market efficiency theory, in one or two sentences to discuss how information about company news is translated into stock prices.

Reference no: EM133064810

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