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Tori Co’s current value = 11.25 × ($23.0 × 0.8) = $207.0m
Value created from combined company
($126.56m + 0.5 × $23.0m × 0.8 + $7m) × 10.35 = $1,477.57
Maximum premium = ($1,477.57m + $150.42m + $4.81m) – ($1,140m + $207.0m) = $285.80m
please explain from where we got 23 in the 1st line. and then what happened in value creation step
$23M if Tori’s per-tax profit as is given in the question. (It is multiplied by 0.8 because the tax is 20% and by 11.25 which is the PE ratio).
The maximum premium is the new MV of the combined company (1477.57) plus the value of Ndege (150.42) plus the sale of assets of C (4.81), less the value of the two companies before they combined (1140 and 207).