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Department
Finance
Course
FIN 401
Professor
Melissa Toffanin
Semester
Fall

Description
Chapter 23 Mergers and Basis Risk When cross-hedging, the Acquisition. risk that the futures prices does not Synergy move directly with the cash price of The whole is worth more than the sum of the parts the hedged asset Number of new shares to be issued ∆V = V AB – (VA+ V )B = funds to be raised/subscription When ∆V>0, the acquisition price generates synergy Number of rights needed to buy one ∆CF = ∆EBIT + ∆Depreciation - ∆Tax - ∆Capital Requirements share = # of old shares/# of new shares ∆CF = ∆Revenue - ∆Costs - ∆Tax - “Cost” to shareholder for one new ∆Capital Requirements share ∆Revenue = difference in revenues = # of exercised rights + subscription ∆Costs = difference in costs price ∆Tax = difference in taxes Ex-rights price ∆Capital Requirements = change in = 1/(N + 1) × (N × initial stock price new fixed assets and net working + subscription price) capital The NPV of a cash acquisition is Theoretical value of a right = (M0– S)/(N + 1) NPV = V *B– cash cost M =0common share price during Value of the com
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