Answer a 40825000 11217

Name: answer a 40825000 11217
Uploaded: 2023-11-14T17:04:33-08:00
Duration: 2 min 42 s
Channel: Akash M
Description: answer a 40825000 11217

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QUESTION 2 Bid Ask Price (ZAR) Size Price (ZAR) Size 20 150 22 250 19 200 23 100 18 100 24 200 17 300 25 400 16 200 26 100 Consider the above double auction book. A buyer enters a bid for 300 shares at a price of R22 each. After he has managed to buy any shares available to him at this price, how many shares are listed at a price of R22 in the continuous double auction book? In which column are the shares? 250 shares; bid column 50 shares; bid column 250 shares; ask column 50 shares; ask column

Akash M.

question-2-14-points-underco-has-10m-shares-outstanding-with-shares-trading-at-8share-one-day-underco-is-targeted-by-a-hostile-tender-offer-for-9share-undercos-management-owns-40-of-the-firm-52286

Text: Question 2 (14 points) UnderCo has 10M shares outstanding with shares trading at $8/share. One day UnderCo is targeted by a hostile tender offer for $9/share. UnderCo's management owns 40% of the firm and will not sell its shares. In order to fend off the bid, management plans to make a competing tender offer to public investors. The company will borrow $30M and use the proceeds to finance the self-tender. UnderCo is initially 100% equity financed. UnderCo faces a corporate tax rate of 50%. Assume UnderCo maintains the level of debt, and that interest tax shields are as risky as the debt. a) Assume UnderCo announces an offer for $9.20/share. This would be a partial tender offer, the size of which is limited by the amount of debt proceeds. Will shareholders tender? Explain using numbers. (Hint: First compute how much the company is worth after borrowing $30M and using it all to buy back shares. Now compute the price of non-tendered shares assuming the bid is successful and compare it with the tender offer) b) If UnderCo offers $10, will shareholders tender? Explain using numbers. c) Can the self-tender offer in (b) successfully fend off the hostile takeover? Explain using numbers.

Akash M.

Transcript

00:01 According to the question, number 1, consumer surplus is equals to blue region.

00:12 Now, consumer surplus is equals to area of triangle abc and consumer surplus is equals to 1 divided by 2 multiply base multiply height.

00:43 Now, base is equals to 17 .5, height is equals to 90 minus 55 which is 35 and consumer surplus is equals to 1 divided by 2 multiply 17 .5 multiply 35.

01:07 So, the value is 306 .25.

01:12 For number 2, dead weight loss is equals to red region...

Question

Answer: a) $40,825,000

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