The costs of equity are 17% for Lindner and 15% for Allen. Lindner plans to offer $5.00 cash and 1.5 shares of its own stock for each share of

Allen

a. Assume no synergy. What are the gains (losses) to each group of shareholders?

b. What synergy should the merged firm produce for the shareholders of Lindner to break even?

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Lindner Allen EPS $2.00 $3.20 Dividend per share 0 $1.60 Number of shares 8,000,000 3,000,000 Stock price $4.00 $8.00 Lindner Allen EPS $2.00 $3.20 Dividend per share 0 $1.60 Number of shares 8,000,000 3,000,000 Stock price $4.00 $8.00

Answer rating: 100% (QA)

a To calculate the gains losses to each group of shareholders we need to first determine the value o... View the full answer