Question: Please type the answer by computer, so i can see it clearly, thank you!!!! Company ABC intends to purchase Company EFG. ABC now has 1,600

Please type the answer by computer, so i can see it clearly, thank you!!!!

Company ABC intends to purchase Company EFG. ABC now has 1,600 outstanding shares with a $55 share price. EFG has 1,100 outstanding shares with a $20 share price. The acquisition's synergy is anticipated to be $11,000.

Question:

1(a) What is the maximum exchange ratio ABC could offer in a stock acquisition and still generate a positive NPV? What is the maximum cash offer ABC (price per share) could make and still generate a positive NPV? Briefly explain your answers.

1(b) Distinguish between a horizontal and a vertical type of acquisition. Give one example of each of the types.

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