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Price per share

$34

$24

Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $3,000.

a. If Firm T is willing to be acquired for $27 per share in cash, what is the NPV of the merger?

b. What will the price per share of the merged firm be assuming the conditions in (a)?

d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers three of its shares for every five of T's shares, what will the price per share of the merged firm be?

e. What is the NPV of the merger assuming the conditions in (d)?

Cash versus Stock as Payment In Problem 9, are the shareholders of Firm T better off with the cash offer or the stock offer? At what exchange ratio of B shares to T shares would the shareholders in T be indifferent between the two offers? Effects of a Stock Exchange Consider the following premerger information about Firm A and Firm B:

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