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In requirement C of the subject question, BPP’s kit states that the amount the MBO funds need to pay shareholders is $60m, which I presume they have calculated it as SC($40M) + Reserves ($10M) + 20% premium.
My question is, shouldn’t the payment done by MBO be based on the market value of $2.83 per share? Or is it because it is an MBO, we do it based on the book value?
The payment is based on the market value.
However the last line of the first paragraph states that $2.83 was the value three years ago and that the current market value is $0.50 per share.
Therefore they will be paid 0.50 + 20% = $0.60 per share.