Corporate Financial Strategy: Analysis of Mergers, Share Alternatives, and Market Laws

Module title: Corporate
Financial Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

SECTION A
Question 1
A
V= D/ K
Where
V= value
D = dividend in next year
K = required rate of return
V= 8/ 7 %
V= 114.3
Thus, with this it can be stated that the price of share of company A is £114.3
B
The law of one price is being defined as the economic theory which states that price of all
identical asset and commodities will be having the same prices irrespective of their location or
any other factors. This law undertakes the only one price in to account of all the market there is
not any other cost being implemented. This law of one price is being attained by way of
eliminating the price difference with help of arbitrage opportunity which is being present within
the markers. This law of one price is the key foundation for the purchase power parity. This
purchase power parity states that value of two currencies is equivalent in case basked of all
identical tools is prices in both the countries is same.
Question 2
Question 3
A
Gain from merger
Cost Amount
Total cash 30000000
Value of company 25000000
5000000
Add-
Marketing cost 400000