Q5) Toyota Motor Corporation has 1 million shares outstanding. The firm is planning to merge with...

 

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Q5) Toyota Motor Corporation has 1 million shares outstanding. The firm is planning to merge with Jack Hammer Corporation with 1.5 million shares outstanding. The market prices for Toyota Motor Corporation and Jack Hammer Corporation are $29 and $18 per share, respectively. The merger could create an estimated savings of $300,000 annually for the indefinite future. Toyota Motor Corporation is willing to pay $20 per share for Jack Hammer Corporation, and the appropriate cost of capital is 5%. Based on the given information, please answer the following questions: a) What would be the present value of the merger gain? (1 Point) b) c) What would be the cost of the cash offer? (1 Point) What would be the NPV of the offer? (2 Points) Q6) You are the financial analyst of Toyota Motor Corporation. Toyota Motor Corporation is analyzing the possible acquisition of Club 15 Corporation. Both firms have no debt. Toyota Motor Corporation believes the acquisition will increase its total after-tax annual cash flows by $1,000,000 indefinitely. The current market value of Club 15 Corporation is $49,000,000, and that of Toyota Motor Corporation is $89,000,000. The appropriate discount rate for the incremental cash flows is 6%. Toyota Motor Corporation is trying to decide whether it should offer 40% of its stock or $62,000,000 in cash to Club 15 Corporation's shareholders. Based on the given information, please answer questions a, b, and c. (6 Points) a) What is the cost of each alternative? (3 Points) b) What is the NPV of each alternative? (2 Points) c) Which alternative should Toyota Motor Corporation choose? (1 Point) Q5) Toyota Motor Corporation has 1 million shares outstanding. The firm is planning to merge with Jack Hammer Corporation with 1.5 million shares outstanding. The market prices for Toyota Motor Corporation and Jack Hammer Corporation are $29 and $18 per share, respectively. The merger could create an estimated savings of $300,000 annually for the indefinite future. Toyota Motor Corporation is willing to pay $20 per share for Jack Hammer Corporation, and the appropriate cost of capital is 5%. Based on the given information, please answer the following questions: a) What would be the present value of the merger gain? (1 Point) b) c) What would be the cost of the cash offer? (1 Point) What would be the NPV of the offer? (2 Points) Q6) You are the financial analyst of Toyota Motor Corporation. Toyota Motor Corporation is analyzing the possible acquisition of Club 15 Corporation. Both firms have no debt. Toyota Motor Corporation believes the acquisition will increase its total after-tax annual cash flows by $1,000,000 indefinitely. The current market value of Club 15 Corporation is $49,000,000, and that of Toyota Motor Corporation is $89,000,000. The appropriate discount rate for the incremental cash flows is 6%. Toyota Motor Corporation is trying to decide whether it should offer 40% of its stock or $62,000,000 in cash to Club 15 Corporation's shareholders. Based on the given information, please answer questions a, b, and c. (6 Points) a) What is the cost of each alternative? (3 Points) b) What is the NPV of each alternative? (2 Points) c) Which alternative should Toyota Motor Corporation choose? (1 Point)

Answer rating: 100% (QA)

5 a To calculate the present value of the merger gain we need to determine the present value of the estimated savings The present value can be calcula... View the full answer