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In this question why has the examiner used the post-acquisition share for calculating a gain on share exchange instead of pre-acquisition price? Moreover, from whose perspective is it?
Secondly, am I right to assume that two bonds with same maturity dates will have same yields regardless of the coupon rate? Because the yield of 4.55% has been used for 2% bond valuation which was actually calculated on 6% bond value.
Thank You! 🙂
It is from the perspective of the acquiring company and so the answer uses the post-acquisition share price. (It is not made very clear really in the question, and so if you write down what you have assumed then you will still get marks.)
And yes – you are right about the yields 🙂
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