1. They help arrange mergers
The bankers will identify firms with excess cash that might want to buy other firms, companies
that might be willing to be bought and companies which might be attractive to others.
2. They help target companies develop and implement defensive techniques
Target firms that do not want to be acquired generally enlist the help of an investment banking
firm, along with a law firm that specializes in helping to block mergers.
3. Establishing a fair value
Investment bankers are experts that can help the firms determine a fair ratio of exchange that is
beneficial (if possible) to both shareholders.
4. They help finance mergers
If the acquiring company has cash flow problems, then investment bankers will provide
required finance for the merger.
They speculate in the shares of potential merger candidates and thereby make arbitrage gains.
Kavungya answered the question on April 14, 2021 at 13:32
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XYZ Ltd. is considered acquiring ABC Ltd. The following information relates to ABC Ltd. for the next five years. The projected financial data are for the post-merger period. The corporate tax rate is 40% for both companies.
Other information
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Required.
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Consider two investments A & B each having the following characteristics:
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A 20 2/3
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Compute the portfolio standard deviation if the correlation coefficient between the assets is
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A pessimistic forecast projects cash earnings before depreciation and taxes at Sh 400,000 per year compared with an optimistic estimate of Sh 500,000 per year. The probability associated with the pessimistic estimate is 0.4 and 0.6 for the optimistic forecast. The company has a policy of using a hurdle rate of 10% for replacement investments, 12% (its cost of capital) for revenue expansion investments into existing product lines and 15% projects involving new areas or new product lines.
REQUIRED:
(a) Compute the expected annual cash flows associated with the proposed equipment investments.
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REQUIRED:
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variety of sources, the total cost of the project has been estimated at Sh.20 million. However, if the
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REQUIRED:
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(b) Comment on other matters which the management should take into account before reaching
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Date posted: April 13, 2021. Answers (1)