Suppose A offers additional shares to B's shareholders For the offer to have a value of ,
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Question:
Suppose A offers additional shares to B's shareholders For the offer to have a value of , we must have the following condition:
Solving, we get Notice that if we tried to calculate how many shares at the current market price of are worth , that number would be Thus, A would be offering too many shares if it used the current market price as the benchmark.
In a stock offer, A offers B's shareholders new shares in the combined firm. Suppose has 25 outstanding shares and B has 10 shares outstanding
How many total newly issued shares should it offe to B's shareholders?
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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