3) (10 points) Luck Products, Inc. is investigating the possible acquisition of YGame. You have the...
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3) (10 points) Luck Products, Inc. is investigating the possible acquisition of YGame. You have the following basic data: YGame $2,50 Earnings per share Dividend per share (D₁) $ 1,50 Number of shares 800.000 Stock price $30 You estimate that investors currently expect a steady growth of about 5% in YGame's earnings and dividends. Under new management this growth rate would be increased to 8% per year, without any additional capital investment required. a) What is the gain from the acquisition? Luck Products $6,00 $3,00 1.200.000 $100 Suppose that Luck Products pays $40 in cash for each share of YGame. b) What is the gain for Luck Products shareholders? c) What is the gain for YGame shareholders? Now suppose that Luck Products offers one share of Luck Products for every four shares of YGame. d) What is the gain for Luck Products shareholders? e) What is the gain for YGame shareholders? 3) (10 points) Luck Products, Inc. is investigating the possible acquisition of YGame. You have the following basic data: YGame $2,50 Earnings per share Dividend per share (D₁) $ 1,50 Number of shares 800.000 Stock price $30 You estimate that investors currently expect a steady growth of about 5% in YGame's earnings and dividends. Under new management this growth rate would be increased to 8% per year, without any additional capital investment required. a) What is the gain from the acquisition? Luck Products $6,00 $3,00 1.200.000 $100 Suppose that Luck Products pays $40 in cash for each share of YGame. b) What is the gain for Luck Products shareholders? c) What is the gain for YGame shareholders? Now suppose that Luck Products offers one share of Luck Products for every four shares of YGame. d) What is the gain for Luck Products shareholders? e) What is the gain for YGame shareholders?
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Answer rating: 100% (QA)
a The gain from the acquisition would be 4896 million Luck Products 250 150 600 300 1200000 100 YGam... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
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