Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. gordis, inc. is considering acquiring stetson corp

Gordis, Inc. is considering acquiring Stetson Corporation. Neither firm has debt. Gordis forecasts that...

70.2K

Verified Solution

Question

Finance

Gordis, Inc. is considering acquiring Stetson Corporation. Neither firm has debt. Gordis forecasts that its annual after-tax cash flows would increase by $4 million indefinitely by making this acquisition. Gordis current market value = $250 million Stetsons current market value = $140 million The appropriate discount rate for the incremental cash flows is 10% Gordis has 1 million shares outstanding (and another 3 million authorized).

a) What is the Synergy from the Merger? What is the estimate of the value of the newly-merged firm?

b) What is the most that Gordis should offer for Stetson?

c) What is the NPV of acquisition to Gordis if it pays $150 million in cash to Stetson?

d) What is the NPV of the acquisition to Gordis if instead of cash it issues 600,000 new shares to Stetsons shareholders to acquire the firm?

e) Should the firm attempt the merger? If so, with which offer?

f) How many shares would Gordis have to issue to make the stock offer equal to the cash offer of $150 million (all else constant)?

g) If Gordis used their pre-merger stock value to determine how many shares were needed to buy Stetson for $150 million, how much more/less would they offer than they intended?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

An angel investor is interested in taking a stake in your business, be proactive and write...

Psychology
1.2K views

Answer to the questions based on your knowledge about positive psychology and happiness theory (PERMA-model; P+E+M)...

Biology
1.2K views

Arrange the steps of the Gram staining procedure in the correct order.Add mordant, Gram's iodine,...

Biology
1.2K views

The loss of a keystone species can lead to to its abundance.O the Competitive Exclusion...

Algebra
1.2K views

Solve the equation where 0 x 360 Round approximate solutions to the nearest tenth of...

Algebra
1.2K views

Find a conformal mapping which maps the region between |z-1|>1 and |z|<2 onto the upper...

Algebra
1.2K views

1 Solve this problem X 2 Y3 When X 3 and Y 2

Algebra
1.2K views

Identify the asymptote for the exponential function shown f x 5 4 3 2 1...

Accounting
1.2K views

On October 1, 2018 Bartley Corporation issued 5%, 10-year bonds with a face value of...

Accounting
1.2K views

Accounting
1.2K views

Chris and Denis are lawyers working under the name King & Associates. Although they have...

Accounting
1.2K views

A receivable is recognized Question 1 options: ...