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hi john
hope you are well
1) in P4 Dec 12 Q3a, under method 2 we are offering 3 of our shares for every 2 of the target company. for this we first calculated the total value of both companies plus synergies and then got the new share price for the parent as $3.64
2) however why didnt the (examiner answer) followed the same approach for method 2 in P4 June 13 2c? here the examiner just used the original parent share price of 9.24 to calculate the share exchange value.
is it ok if i follow the first approach as shown in P4 Dec 12 Q3a
It depends whether we are considering it from the position of the acquiring company (who are in a position to estimate the new share price) or from the position of shareholders in the target company, who do not have the information and therefore are looking at the current share price.
If it is not clear from the question (and it is not always clear) then (as always for Paper AFM) state your assumption and you will get the marks.
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