Firm A has announced it offers to buy firm B. Just before the announcement, both firms...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Firm A has announced it offers to buy firm B. Just before the announcement, both firms traded at $10 per share. After, A trades at $9.50, and B at $12. a. A offers to buy B for 1.5 shares of A plus 1 dollar in cash per share of B. Describe how you would set up a "merger arb" strategy that bets on deal completion. I b. What is your profit if the deal goes through? c. What is your loss if the deal is called off, and under which assumptions? d. Would your answer to c. change if you knew that there have been rumors of merger discussions before the announcement? If so, how? Firm A has announced it offers to buy firm B. Just before the announcement, both firms traded at $10 per share. After, A trades at $9.50, and B at $12. a. A offers to buy B for 1.5 shares of A plus 1 dollar in cash per share of B. Describe how you would set up a "merger arb" strategy that bets on deal completion. I b. What is your profit if the deal goes through? c. What is your loss if the deal is called off, and under which assumptions? d. Would your answer to c. change if you knew that there have been rumors of merger discussions before the announcement? If so, how?
Expert Answer:
Answer rating: 100% (QA)
SOLUTION a To set up a merger arb strategy that bets on deal completion you would take the following steps 1 Assess the terms of the offer A offers to buy B for 15 shares of A plus 1 in cash per share ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Cottrell Lamps reported a net income of $530,000 for the current year. In addition Cottrell Lamps had 50,000 common shares outstanding throughout the year, an income tax rate of 34%; and has $100,000...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
What is the importance of developing plans to achieve organizational goals? explain with examples
-
Calicene, like azulene (Problem 15.17), has an unusually large dipole moment for a hydrocarbon. Explain, using resonancestructures. Calicene
-
1. Bonds are usually classified in other liabilities. 2. Transaction costs always reduce the value of the financial liability. 3. The cash received will be more than the face value of the bond if a...
-
A simple pendulum of length \(0.8 \mathrm{~m}\) is released from the initial position of \(80^{\circ}\) from the vertical. How long does it take to reach the position \(\theta=0^{\circ}\) ?
-
The board of Kopi Industries is considering a new dividend policy that would set dividends at 60% of earnings. The recent past has witnessed earnings per share (EPS) and dividends paid per share as...
-
6. A thin rod with length L is placed along the y-axis as shown in the figure. The midpoint of the rod is at the origin. The rod has been given a non-uniform charge density given by = 4(y+d) y dq P...
-
On January 1, 2010, Phelps Company purchased an 85% interest in Sloane Company for $955,000 when the retained earnings of Sloane Company were $150,000. The difference between implied and book value...
-
Create a freehand sketch. Use the dimensions to help in estimating proportions. Leave the dimensions off your sketch unless directed otherwise by your instructor.
-
1. Currently, Jim Morris makes $100,000. Next year his income will be $120,000. Jim is a big spender and he wants to consume $150,000 this year. The equilibrium interest rate is 10 percent. What will...
-
Kraft Heinz was forced to pay $62 million to settle charges of accounting fraud. Two top executives coordinated the plan, which involved some accounting trickery that overstated the company's cost...
-
General, assuming no exceptions apply, how long is the statue of limitations for taxpayers to file a claim to refund or for the IRS to assess additional tax?
-
At the end of 2019 , Bolton decides to adjust the manufacturing overhead rate to 190 % of direct labor cost. She explains to the company president that, because overhead was underallocated in 2019 ,...
-
Accounting summarizes financial transactions and other information within companies, non-profit organizations, and government offices. For whom is accounting information useful?
-
A. B. Applewood Electronics Itd reported net earnings of $ 500 000 for the year ending December 31,2019. The company had 250 000 shares of $1 par value common stock and 60 000 shares of $20 par value...
-
What will be the final value of DI after executing the following piece of code? Execute the instructions dependently one after another. CLD MOU CX,OFOH MOU AX.02874H MOU DI,01000H MOU ES, DI SUB...
-
Evaluate x y and z at the given point. (x, y, z) = xy + 2xyz - 3yz, (-2, 1, 2)
-
In Exercises find the derivative of the algebraic function. f(x) 1 X x - 3 2-
-
In Exercises find the slope of the tangent line to the graph at the given point. Folium of Descartes: x + y - 6xy = 0 Point: (,) y 4 3 2- 1 -2 1 2 3 4 X
-
T/F: BOs is the middle layer of stability model.
-
T/F: BOs are internally stable and externally adaptable.
-
T/F: BOs are the capabilities of achieving the goals (EBTs).
Study smarter with the SolutionInn App