There is a firm, which we have identified to buy. It has $100 million, $30 and $70 m assets, equity and debt respectively. It also has $40 m of cash. We want to buy a majority interest in the firm by using a lot of debt and as little equity as possible on our part. If we assume that there will be a 20% premium increase once we start bidding for the firm, how much should we borrow, if we can use the cash of the target itself to fund our acquisition?

Answer rating: 100% (QA)

How much should we borrow if we can use the cash of the target itself to fund our acquisition We wil... View the full answer