As a merger arbitrageur you are considering an investment in two target companies of a merger, A and B. The deal spread for A is 16 % and for B the deal spread is 8 %. Which of the following statements correct? O A. The probability of deal failure is higher for A than for B. O B. The probability of deal failure is higher for B than for A.
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- As a merger arbitrageur you are considering an investment in two target companies of a merger, A and B. The deal spread for A is 16 % and for B the deal spread is 8 %. Which of the following statements is correct? O A. If both deals fail, then A will have a more negative return than B. O B. If both deals fail, then B will have more negative return than A.For Question 1, 2, and 3, use the following information: 1.) Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,500 1,500 Price per share $ 45 $ 15 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $10,600. If Firm T is willing to be acquired for $20 per share in cash, what is the NPV of the merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Please round to the nearest dollar and format as "X,XXX" 2.) Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,500 1,500 Price per share $ 45 $…(a) Financial engineering deals with the design of new assets. Draw the payoff (at t=1) of the following bull butterfly spread: Purchase 1 call with exercise price a Sell 2 calls with exercise price (atb)/2 Purchase 1 call with exercise price b as a function of the underlying stock price S at t=1 where a=120and b=140. (b) An individual agent thinks that there is a high probability that the Dow Jones will have a payoff (or points) between a=32,000 and b=36,000 at t=1. Design a digital option (see Figure 1) as a sequence of calls on the Dow that converges to a pure bet on getting $1 on the interval [32,000, 36,000], i.e. if the Dow lies between Se[32,000, 36,000] at t=1, then the portfolio of calls pays off exactly $1. The payoff is O otherwise. Figure I (Digital option) payoff a-32,000 b-36,000 Hint: You have to modify the sell strategies of a bull butterfly spread to obtain a payoff as given in Figure 2 and then adjust n and õ appropriately. Figure 2 payoff of portfolio 1-nő a b-8
- An all cash deal will have what impact on Pro Forma EPS (assuming both companies have a positive EPS): a lower accretion than an all share deal. the same level of accretion as an all share deal. a higher accretion than an all share deal. a higher dilution than an all share deal.If a firm wishes to achieve immediate appreciation in earnings per share as a result of a merger, how can this be best accomplished in terms of exchange variables? What is a possible drawback to this approach in terms of long-range considerations?The following graph represents the Cumulative Average Abnormal Return (CAAR) for the stocks of companies targeted for take-over. Which of the following statements is true? a. In a weak form efficient market, t* is the actual takeover event (i.e. the time when the legal takeover transaction is completed) b. In a semi-strong form efficient market, t* is the takeover announcement event c. In a strong form efficient market, t* is the acquiring company takeover decision event (i.e. the time when an acquiring company decides to launch a takeover) d. (a) & (b) e. (b) & (c)
- 42. Which of the two companies gives a better investment: company A with a current market value of P3.55 and P0.72 dividend or company B Soľn: with a current market value of P53.20 and a dividend of P7.32? A. company A B. company B C. both A and B D. none of themNizwa investment company is willing to buy the equity shares directly from various companies as they think that buying the shares at the first moment will always give benefits for long timeThe market from where this transaction will be carried out is termed as a.Primary Market b.Regular Market c.Secondary Market d.None of the options A financial statement which shows the status of the worth of a company on a certain date is known as a.Cash flow statement b.Balance Sheet c.All of the optionsWhen an acquirer chooses between cash offer or stock offer, which of the followings is the least important consideration? Capital structure. O The preference of the target's managers. O Uncertainty of the estimated synergy. Тах.
- Which of the following should lead to a lower share price: (as the result of a mechanical effect, not due to signaling) 1. firm does a stock split 2. firm pays dividends 3. firm repurchases shares 4. firm issues shares 5. firm issues debt 6. firm makes an acquisition at a fair price, with negligible synergies O 1,2,3 0 23 O 1,2,3,4,5,6 O 2,3,5,6 O 1,2,3,5 0 1,2 O 2,3,5Suppose that in April 2019, Nike Inc. had sales of $36,403 million, EBITDA of $5,214 million, excess cash of $5,245 million, $3,818 million of debt, and 1,583.3 million shares outstanding. a. Using the average enterprise value to sales multiple in the table here,, estimate Nike's share price. b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in the table above? c. Using the average enterprise value to EBITDA multiple in the table above, estimate Nike's share price. d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in the table above? a. Using the average enterprise value to sales multiple in the table above, estimate Nike's share price. Nike's share price using the average enterprise value to sales multiple will be $ (Round to the nearest cent.) b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples…Choose the letter of the correct answer: 1. In which of the following situations would an investor likely account for stock ownership in an investee using the equity method? A. The investor and the investee have many transactions with each other B. The investor owns 15 percent of the investee’s stock C. The investor and investee reside in close proximity to each other D. The investor has significant influence over the investee’s management policies 2. When the cost model/method is used to account for an investment, which of the following would not result in an adjustment to the amount recorded in the investment account? A. The investee declares a regular dividend B. The investor sells some of the stock C. The investee declares a liquidating dividend D. The stock’s market value decreases to a point where is it below the investor’s cost