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John Moffat.
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Jiya024
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sir in this question, if we were given the cost of equity of the combined company and if for example one of the offers would have included a bond offer, then we would have had to deduct bond coupon from combined earnings, to arrive at combined MV of equity using given Ke, right?
and then gain for respective company shareholders would have meant combined MV of equity/total no.of shares, without deducting the bond? because bond interest has already been deducted.
John Moffat
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Yes – discounting the free cash flow to equity (which is after debt interest) at the cost of equity gives the MV of equity, as I explain in my free lectures.
Jiya024
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