Forum Replies Created
- Posts
The synergy saving in this case is obtained from sources like selling excess non-current assets, eliminating administrative functions, and reducing workforce numbers, so it is safe to assume that these synergy benefits are not related to individual-year earnings, and instead, refer to the total additional value generated from the acquisition.
Also, there is no mention of the combined company PE, so the use of the after-tax earnings method is not possible.
What is meant by this statement is, that interest rate futures and forwards in a way fix the interest rate payment at a certain percentage (in this case it’s 4.47% for futures), i.e. no matter how much interest rate fluctuation happens in the bond market, the net interest payment will be at 4.47%(considering all the assumptions like no basis risk, transactional costs, etc. hold true).
In contrast, a change in the market interest rate of bonds will result in a change in the net interest payment while using collars and options. If the market interest rate favors the option buyer, he will let the option lapse; if it does not, he will exercise the option, changing the amount of net interest that must be paid in both cases.
