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Velcro Saddles is contemplating the acquisition of PogoVelcro Saddles is contemplating the acquisition of Pogo

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Velcro Saddles is contemplating the acquisition of Pogo Ski Sticks, Inc. The values of the two companies as separate entities are $20 million and $10 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $500,000 per year in perpetuity Velcro Saddles. The opportunity cost of capital is 10%.;a. What is the gain from merger?;b. What is the cost of the cask offer?;c. What is the cost of the stock alternative?;d. What is the NPV of the acquisition under the cask offer?;e. What is its NPV under the stock offer?

 

Paper#33574 | Written in 18-Jul-2015

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