1. For the meeting that will start with Penny, what are the BATNA and the reservation price of the BBT’s shareholders, in terms of average expected value? Explain your calculations. (2 marks)

2. What will be the impact on the reservation price of BBT’s shareholders, of the following 3 statements, each considered separately (note: respond in terms of whether the reservation price for BBT’s shareholders will increase, remain the same, or decrease and justify the answer): (6 marks)

a) The probability of Company Y buying BBT for 13 lakh crores is 75%.

b) The probability of Company X buying BBT for 11 lakh crores is less than 90%.

c) The decision by Company Y if it will buy or not buy BBT will be announced today in the evening.

3. Identify 2 aspects that may influence Sheldon’s decision based on the calculation of this average expected value of the reservation price referred to in Question 1? (2 marks)

Now, once the meeting started, Sheldon began by immediately saying to Penny that he did not want to waste time with this meeting, and so he was going straight to the point: - “Either Penny offered 17 lakh crores, or it was not worth losing more time negotiating.”

The shareholders of “BBT” want to sell out 100 % stake of their company. The company is owned by Cooper family, who had never been involved in the company’s operational management. Shareholders will accept any offer higher than 10 lakh crores considering that 13 lakh crores would be a very good price. (Note: the sale prices of the Company BBT referred to throughout the test are always in cash and payment on the spot for the acquisition of 100 % stake in the company, unless explicitly stated otherwise). The CEO – Sheldon, who is not and has never been a shareholder of the company, is the main authority responsible for the sale process.
There are only 3 potential buyers:

• The company X

• The company Y

• The company Z

For various reasons, if BBT is not sold within two weeks to one of these firms, the company BBT will have a zero value.
Sheldon has already negotiated with Company X and Company Y. According to Sheldon:

• There is a buying proposal from Company A, which expires today at the end of the day, in the amount of 11 lakh crores.

• There is a 90% probability of selling BBT to Company B for 13 lakh crores. However, their final decision to buy BBT or not to buy BBT will be announced in one week.
Sheldon will now have a meeting to try to reach an agreement with Penny – The CEO of Company C.

Answer rating: 100% (QA)

Question 1 At the start of the meeting with Penny the following can be BANTA and reservation price B... View the full answer