FIN 401 Study Guide - Final Guide: Capital Asset Pricing Model, Tax Shield, Underwriting

• School: Ryerson University
• Department: Finance
• Course: FIN 401
• Professor: Melissa Toffanin

Document Summary

Value of merged firm: vab >va +vb. Incremental net gain (synergy): v =vab (va +vb) Value of firm b to firm a: v*b = v +vb. Cash flows: cf = ebit + dep tax capreq. Capital req = change in net fixes assets and net working capital. Npv of merger: npv =v*b - cost. Value of firm a after cash merger (combined firm): Value of firm a after stock merger (combined firm): Minimum economic value: offer cost- worth of acquired firm. Max share price = mkt share price +(after tax benefit/shares o/s) Goodwill=purchase price /assets from acquired firm. Firm x, takeover firm y by exchange. Firm x 1 share for every 4 shares of y. Y"s sh offered ^stock deal or /share in cash. Exchange ratio: cash value per share = stock value per share. 48= (firm x"s stock price) *(exchange ratio) 48= 200* (exchng ratio) exchng ratio = 0. 24.