solution

A bidding firm, A, is vorth $27,000 as a stand-alone entity. A target firm, B, is worth $12,000 as a stand-alone entity, but $18,000 if it is acquired and integrated with Fir A. Several other firns are interested in acquiring Firn B, and Firn B is also vorth $18,000 if it is acquired by these other firms. If A acquired B, vould this acquisition create value? If yes, how much? How much of this value vould the equity holders of A receive? How much would the equity holders of B receive?

Question 2

The sane scenario as in a, except that the value of B if it is acquired by the other firas interested in it is only $12,000.

Question 3

The sane scenario as in a, except that the value of B if it is acquired by the other finns interested in it is $16,000.

Question 4

The sane scenario as in b, except that Firm B contacts several other firms and explains to them how they can create the sane value with Firm B that Firm A does.

Question 5

The sane scenario as in b, except that Firn B sues Fir A. After suing Firm A, Firm B installs a “supernajority’ rule in how its board of directors operates. After putting this new rule in place, Firm B offers to buy back any stock purchased by Fira A for 20% above the current market price.