MegaToy Inc

question 13

Essay

MegaToy Inc.is considering acquiring Action Figures Inc.,both publicly traded firms in the toy industry.Action Figures is currently trading at $18 per share and has 15 million shares outstanding.The executive team at MegaToy believes that the present value of potential synergies is $70 million if the firms combine.What is the highest bid price per share that MegaToy should consider paying for Action Figure shares? What is the largest percentage premium over the current share price MegaToy would be willing to pay?

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Definitions:

Interdependence

A condition where entities or individuals rely on each other to accomplish objectives, often resulting in mutual benefits and cooperation.

Complex

A term describing an entity or system that consists of many different and connected parts, exhibiting behaviors that emerge from the interactions of its individual components.

Simple

Easily understood or done; presenting no difficulty or complexity.

Cross-functional Team

A team composed of members from different departments or areas of expertise, working together towards a common goal.