Home / Questions / Sweet Cola Corp SCC is bidding to take over Salty Dog Pretzels SDP SCC has 3000 shares out...
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Sweet Cola Corp. (SCC) is bidding to take over Salty Dog Pretzels (SDP). SCC has 3,000 shares outstanding, selling at $50 per share. SDP has 2,000 shares outstanding, selling at $17.50 a share. SCC estimates the economic gain from the merger to be $15,000. |
| a. |
If SDP can be acquired for $20 a share, what is the NPV of the merger to SCC? |
| NPV | $ |
| b-1. |
What will SCC sell for when the market learns that it plans to acquire SDP for $20 a share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Selling price | $ |
| b-2. | What will SDP sell for? |
| Selling price | $ |
| b-3. |
What are the percentage gains to the shareholders of each firm? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) |
| Gains | |
| SCC | % |
| SDP | % |
| c. |
Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, SCC sells for $50, so instead of paying $20 cash, SCC issues .40 of its shares for every SDP share acquired. What will be the price of the merged firm? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Price | $ |
| d. |
What is the NPV of the merger to SCC when it uses an exchange of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| NPV | $ |
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