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Dear tutor,
suppose we are given the exercise concerning mergers and acquisitions – to calculate the value of company being acquired
My quesion to you is: will we be given in the exam paper the number of type acquisition (I, II or III)? Or we have to identify the type ourselves?You will be expected to identify yourself. However the ‘number’ of the type is irrelevant.
You need to check whether the business risk changes – it almost certainly will, and you will know because of the betas being given. You also need to check whether or not the gearing is going to change.If you are expected to calculate an APV, then you will almost certainly be told in the requirements to take an APV approach.
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