Question: This two question need to be answer Question 1 5 pts Your firm is buying SmallCo. If you purchase SmallCo, you will be able to
This two question need to be answer
Question 1 5 pts Your firm is buying SmallCo. If you purchase SmallCo, you will be able to invest in a project with an upfront cost of $30 million, which pays out $6 million after taxes per year for 22 years. Both your firm and SmallCo are all equity, and your unlevered cost of equity will be 0.12 after the merger. If you have to offer SmallCo's shareholders a $14 million premium to get them to accept the deal, what is the NPV of this merger? Question 2 5 pts BuyCo is purchasing SellCo, and paying in shares. BuyCo has a share price of $46, with 18 million shares outstanding. SellCo has a share price of $12, with 12 million shares outstanding. If the merger will create synergies with an NPV of $46 million dollars, and SellCo will not sell unless they get 0.7 of the synergies, how many shares in the merged form should BuyCo offer SellCo's equity holders in payment
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