In 1994, Paramount was the object of a bidding contest between two suitors: QVC and Viacom....

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In 1994, Paramount was the object of a bidding contest between two suitors: QVC and Viacom. The share prices before and after the bid announcemar Paramount QVC Viacom ale Before $23 $49 $39 202² Viacom's offer for each share of Paramount consisted of: 1) $53.60 in cash, 2) debt securities worth $8.41, 3) 0.465 shares in Viacom, 4) 0.465 contingent value rights ("CVRs"), and 5) 0.40 5-year warrants mi k is QVC's offer for each share of Paramount consisted of 1) cash and preferred shares in QVC with a total value of $56, 2) 0.62 shares of QVC, and 3) 0.16 3-year warrants du 2024 hika ents were as follows: mmagadda/l a) How would you go about assessing the value of the synergy that is being expected by the market and the probability of victory by each bidder. Assume one of the two will win. What other assumptions are you making? M o potential outcomes. akshi du (You do not have to compute any numbers, simply set up the procedure using symbols such as C for the value of the CVR, etc.) ope np shi b) The payoff on the CVR is as follows: Viacom will make additional cash payments if its share price 3 years after the merger falls below $48. The payoff will be 48 less Viacom's share price up to a max of $12. Why are Viacom and QVC using such complicated offers? akshmiKrithika adda/Laks In 1994, Paramount was the object of a bidding contest between two suitors: QVC and Viacom. The share prices before and after the bid announcemar Paramount QVC Viacom ale Before $23 $49 $39 202² Viacom's offer for each share of Paramount consisted of: 1) $53.60 in cash, 2) debt securities worth $8.41, 3) 0.465 shares in Viacom, 4) 0.465 contingent value rights ("CVRs"), and 5) 0.40 5-year warrants mi k is QVC's offer for each share of Paramount consisted of 1) cash and preferred shares in QVC with a total value of $56, 2) 0.62 shares of QVC, and 3) 0.16 3-year warrants du 2024 hika ents were as follows: mmagadda/l a) How would you go about assessing the value of the synergy that is being expected by the market and the probability of victory by each bidder. Assume one of the two will win. What other assumptions are you making? M o potential outcomes. akshi du (You do not have to compute any numbers, simply set up the procedure using symbols such as C for the value of the CVR, etc.) ope np shi b) The payoff on the CVR is as follows: Viacom will make additional cash payments if its share price 3 years after the merger falls below $48. The payoff will be 48 less Viacom's share price up to a max of $12. Why are Viacom and QVC using such complicated offers? akshmiKrithika adda/Laks In 1994, Paramount was the object of a bidding contest between two suitors: QVC and Viacom. The share prices before and after the bid announcemar Paramount QVC Viacom ale Before $23 $49 $39 202² Viacom's offer for each share of Paramount consisted of: 1) $53.60 in cash, 2) debt securities worth $8.41, 3) 0.465 shares in Viacom, 4) 0.465 contingent value rights ("CVRs"), and 5) 0.40 5-year warrants mi k is QVC's offer for each share of Paramount consisted of 1) cash and preferred shares in QVC with a total value of $56, 2) 0.62 shares of QVC, and 3) 0.16 3-year warrants du 2024 hika ents were as follows: mmagadda/l a) How would you go about assessing the value of the synergy that is being expected by the market and the probability of victory by each bidder. Assume one of the two will win. What other assumptions are you making? M o potential outcomes. akshi du (You do not have to compute any numbers, simply set up the procedure using symbols such as C for the value of the CVR, etc.) ope np shi b) The payoff on the CVR is as follows: Viacom will make additional cash payments if its share price 3 years after the merger falls below $48. The payoff will be 48 less Viacom's share price up to a max of $12. Why are Viacom and QVC using such complicated offers? akshmiKrithika adda/Laks

Answer rating: 100% (QA)

a To assess the value of the synergy and the probability of victory for each bidder we can follow these steps 1 Calculate the implied probability of v... View the full answer