RSM333H1 Lecture Notes - Lecture 9: Operating Leverage, Net Income, Marginal Cost
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Acquirer has 1000 shares at , target has 100 shares at , synergies worth ,400. Buyer pays with shares, neither firm has debt or cash. Find maximum premium buyer would pay for target. Buyer from q1 pays with shares at premium of 25% Growth rate period 1 to 25 = 5%, growth rate after period 25 = 2% Find fcfe for terminal stage of 2-stage model. Firm a has share price of 27. 5, eps of 1. 5. Understand what cost of capital means for corporation in terms of financial performance and valuation. Assets are paid for by liabilities and equities. From financing from investors or accruals from day-to-day operations. Financing is capital that investors have invested in the firm. Money given to firm in return for security/financial instrument. What sales firm needs to achieve to meet rates of return required by shareholders and bondholders. Debt has lower rate of return than equity. Less risky because debt holders are paid first.
