Three Guys Burgers, Inc., has offered $23.5 million for all of the common stock in Two...
Three Guys Burgers, Inc., has offered $23.5 million for all of the common stock in Two Guys Fries, Corp. The current market capitalization of Two Guys as an independent company is $20.1 million. Assume the required return is 9.6 percent and the synergy from the acquisition is a perpetuity.
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What is the minimum annual synergy that Three Guys feels it will gain from the acquisition? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
| Annual synergy | $ ?????????? |
Homework Answers
Minimum synergy gain = Value of common stock offered in TGF incorporation – Market capitalization of TGF
Minimum synergy gain = $23,500,000 – $20,100,000
Minimum synergy gain = $3,400,000
Minimum synergy = Annual synergy/R
$3,400,000 = Annual Synergy/0.096
Annual synergy = $3,400,000 x 0.096
Annual synergy = $326,400
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