博迪《金融学》课后习题答案-英文ch17_IM_1E.docVIP

Instructor’s Manual Chapter 17 Page  PAGE 184 CHAPTER 17 FINANCE AND CORPORATE STRATEGY Objectives To show how to use finance theory to analyze strategic decisions such as: Acquiring or merging with another firm Spinning off a business unit as a separate firm Investing in real options OutlineTOC \f 17.1 Mergers and Acquisitions 17.2 Spinoffs 17.3 Investing in Real Options Summarytc \l1 Summary There are three valid reasons for a merger or acquisition: To reduce operating costs through synergies To reduce taxes To take advantage of bargains in the stock market Diversification of risk is a poor reason for two firms to merge, because in general shareholders can diversify their portfolios on their own; they do not need the firm to do it for them. An extremely important feature of investment projects is the ability of managers to delay the start of a project, or once started, to expand it or to abandon it. Failure to take account of these management options will cause an analyst evaluating the project to underestimate its NPV. Recognizing the similarity between financial options and real managerial options is important for three reasons: It helps in structuring the analysis of the investment project as a sequence of managerial decisions over time, It clarifies the role of uncertainty in evaluating projects, It gives us a method for estimating the option value of projects by applying the quantitative models developed for valuing call options on stocks. Solutions to Problems at End of Chapter Hampshire-Cathaway (H-C), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Trilennium Corporation, a young firm with a high growth rate of earnings. The acquisitions analysis group at H-C has produced the following table of relevant data:  Hampshire-Cathaway Trilennium Earnings per share $3.00 $2.00 Dividend per share $3.00 $.80 Number of shares 200 million 10 million Stock price $30 $20