Rogers is contemplating the acquisition of Shaw. The values of the two companies as separate entities are $40 billion and $20 billion, respectively. Rogers estimates that by combining the two companies, it will reduce after-tax marketing and administrative costs by $1 billion per year in perpetuity. Rogers is willing to pay $26 billion cash for Shaw. The opportunity cost of capital is 8% and the tax rate is 30%.

-What is the gain from merger? 

-What is the cost of the cash offer? 

-What is the cost of the sock alternative? 

-What is the NPV of the acquisition under the cash offer? 

-What is the NPV under the stock offer?

Answer rating: 100% (QA)

The gain from merger is 6 billion The cost of ... View the full answer