Firm A is contemplating acquiring firm B by stock payment. In order to comfort the shareholders of firm B, firm A provi
Posted: Sun Apr 17, 2022 6:23 pm
Firm A is contemplating acquiring firm B by stock
payment. In order to comfort the shareholders of firm B,
firm A provides contingent value rights (CVR) to shareholders of
firm B: each newly issued share of firm A will
receive a cash payment equal to the difference between $33 and the
stock price of firm A one year after deal closing, up to a maximum
of $3.30.
1b) How much will shareholder of firm B receive from firm A if
firm A stocks end up trading at $31.30 per share one year after
deal closing?
1b) How much will shareholder of firm B receive from firm A if
firm A stocks end up trading at $33.30 per share one year after
deal closing?
1c) By means of a table, show how the payoff function of the
shareholder of firm B with these CVR is equivalent to positions on
financial options with different exercise price.
payment. In order to comfort the shareholders of firm B,
firm A provides contingent value rights (CVR) to shareholders of
firm B: each newly issued share of firm A will
receive a cash payment equal to the difference between $33 and the
stock price of firm A one year after deal closing, up to a maximum
of $3.30.
1b) How much will shareholder of firm B receive from firm A if
firm A stocks end up trading at $31.30 per share one year after
deal closing?
1b) How much will shareholder of firm B receive from firm A if
firm A stocks end up trading at $33.30 per share one year after
deal closing?
1c) By means of a table, show how the payoff function of the
shareholder of firm B with these CVR is equivalent to positions on
financial options with different exercise price.