Three Guys Burgers, Inc., has offered $24.5 million for all of the common stock
ID: 2797589 • Letter: T
Question
Three Guys Burgers, Inc., has offered $24.5 million for all of the common stock in Two Guys Fries, Corp. The current market capitalization of Two Guys as an independent company is $19.9 million. Assume the required return is 9.2 percent and the synergy from the acquisition is a perpetuity.
What is the minimum annual synergy that Three Guys feels it will gain from the acquisition? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Three Guys Burgers, Inc., has offered $24.5 million for all of the common stock in Two Guys Fries, Corp. The current market capitalization of Two Guys as an independent company is $19.9 million. Assume the required return is 9.2 percent and the synergy from the acquisition is a perpetuity.
Explanation / Answer
Minimum annual synergy = Market capitalisation / Required rate of return = $19.9/0.092 = $216.3043 million = $ 216304347.83
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