a. Poda Ltd is contemplating the acquisition of Pasuman Incorporated. The values of the two...
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a. Poda Ltd is contemplating the acquisition of Pasuman Incorporated. The values of the two companies as separate entities are 30million and $10million respectively. Poda estimates that by combining the two companies, it will reduce marketing and administration costs by 700,000 per year in perpetuity. Poda can either pay $15million cash for Pasuman Incorporated or offer Pasuman a 50% holding in Poda. If the opportunity cost of capital is 10%. i. What is the gain from merger? (2 marks) ii. What is the cost of the cash offer? (2 marks) iii. What is the cost of the stock alternative? (2 marks) (2 marks) iv. What is the NPV of the acquisition under the cash offer? (2 marks) y. What is its NPV under the stock offer? thau
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