Paola’s has a market value of $2,700 and believes that if it…

Paola’s has a market value of $2,700 and believes that if it acquires Tyler’s in a stock transaction, the expected synergy of $150 will result in the combined new firm being worth $4,500. If Paola’s wants to keep 70 percent of the synergy for itself, what should be the value of the stock it issues to Tyler’s?

Rachel owns 100 percent of a gift shop with an equity value…

Rachel owns 100 percent of a gift shop with an equity value of $150,000. If she keeps the shop open 5 days a week, EBIT is $75,000. If the shop remains open 6 days a week, EBIT increases to $92,000 annually. Rachel needs an additional $50,000 which she can raise today by either selling stock or issuing debt at an interest rate of 7 percent. The principal amount would be repaid in equal annual payments at the end of the next five years. Ignore taxes. What will be the cash flow for the year to Rachel if she issues debt, remains open 5 days a week, and distributes all the residual cash flow to the shareholders?

Cassandra’s has 6,100 shares outstanding at a market price p…

Cassandra’s has 6,100 shares outstanding at a market price per share of $24. Adrian’s has 3,500 shares outstanding at a market price of $56 per share. Neither firm has any debt. Adrian’s is acquiring Cassandra’s for $155,000 in cash. The synergy of the acquisition is $22,500. What is the value of Cassandra’s to Adrian’s?

Havelund has 2,000 shares of stock outstanding with a par va…

Havelund has 2,000 shares of stock outstanding with a par value of $1 per share and a market value of $26 per share. The balance sheet shows $2,000 in the common stock account, $9,500 in the capital in excess of par account, and $14,500 in the retained earnings account. The firm just announced a stock dividend of 75 percent. What is the market value per share after the dividend?

A company has declared a dividend of $8.15 per share on its…

A company has declared a dividend of $8.15 per share on its stock. Capital gains are not taxed. Suppose the IRS has issued a new regulation that requires taxes of 15 percent be withheld at the time the dividend is paid. The stock currently sells for $138.35 per share. What will the ex-dividend price be?

Golden’s is merging with Rosa’s. Golden’s has debt with a fa…

Golden’s is merging with Rosa’s. Golden’s has debt with a face value of $80 and Rosa’s has debt with a face value of $50. The premerger values of the firms given two economic states with equal probabilities of occurrence are as follows: Premerger Values: Stage 1 Stage 2 Market Value Golden’s Assets $ 130 $ 50 $ 90 Debt 80 50 65 Equity 50 0 25 Rosa’s Assets $ 30 $ 90 $ 60 Debt 30 50 40 Equity 0 40 20 If the merger provides no synergy, and if Rosa’s stockholders receive stock in the combined firm in an amount equal to the standalone value of Rosa’s, what will be the combined gain or loss to the bondholders of these two firms?