Assume that the acquisition of Titan Tech by Apex AI will result in savings of $2million annually in perpetuity for the combined firm. The required rate of return on the combined firm is 8%. The transaction costs will amount to $1 million. Both Apex AI and Titan Tech have no debt outstanding. 

Requirement :

a. What is the present value of the net gain from the merger? 

b. If a cash offer of $60 million is accepted by Titan Tech's shareholders, what is the value created for Apex AI's shareholders? 

c. If shares are offered in such a way that Titan Tech's shareholders would possess one-third of the merged entity, what is the value created for Apex AI's shareholders

Answer rating: 100% (QA)

a Present Value of the Net Gain from the Merger Description The present value of the net gain from the merger is calculated by first determining the p... View the full answer