In order to acquire this firm, HappyValley has paid $2 million advisory fee to check whether...
In order to acquire this firm, HappyValley has paid $2 million advisory fee to check whether this acquisition is legal. HappyValley bought a building 10 years ago with $10 million. The building is not in use and the market price for the building is now $100 million. If the acquisition is successful, HappyValley will move the headquarter of HappyParadise to this building. If the acquisition fails, HappyValley will sell this building. The market value of equity of HappyParadise is $2,500 million now. HappyParadise agrees that HappyValley can buy 60% of the total equity for this acquisition. What is the initial investment for this acquisition?
Homework Answers
Purchase value of building purchased by HappyValley 10 years ago = $10 million
Current Market value of building now is $100 million
Total Payment for acquiring 60 % equity = market value of Equity of HappyParadise * 60%
= $2,500 million * 60%
= $1,500 million
Therefore, initial Investment for the acquisition = Current market value of building now + total payment for acquiring 60% of equity
= $100 million + $1,500 million
= $1,600 million
Therefore, Initial investment for the acquisition is $1,600 million
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