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Explanation/Reference:
Explanation:
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Company A has made an offer to acquire Company Z.
Both companies are quoted and their current market share prices are:
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* Company Z - $5
Shareholders in company Z have been given three alternative offers:
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* Share for share exchange on the basis of 3 for 2
* 10.5% long dated bond for every 20 shares
The bond is has a nominal value of $100 and the expected yield on bonds of similar risk is 10%.
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She requires a 15% premium if she is to accept the offer.
In providing your advice, which of the following statements is correct?
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