Question 3 Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. CD has determined that if it combines resources with AB, cost savings will be worth GH¢25 million today. On this basis CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? (i) What are the gains of this transaction?
(ii) Suppose CD has issued 100 of its shares to its shareholders, and is considering issuing 30 shares to the shareholders of AB, what is the cost of the share offer?
(iii) What is the net present value of the transaction under the cash offer to CD?
(iv) What is the net present value under the share offer?

For example, the upper right cell shows that if expresso advertises and beantown doesn't advertise, expresso will make a profit of $15 million, and beantown will make a profit of $2 million. assume this is a simultaneous game and that expresso and beantown are both profit-maximizing firms. if expresso decides to advertise, it will earn a profit of $ million if beantown advertises and a profit of $ million if beantown does not advertise. if expresso decides not to advertise, it will earn a profit of $ million if beantown advertises and a profit of $ million if beantown does not advertise. if beantown advertises, expresso makes a higher profit if it chooses . if beantown doesn't advertise, expresso makes a higher profit if it chooses . suppose that both firms start off not advertising. if the firms act independently, what strategies will they end up choosing? expresso will choose to advertise and beantown will choose not to advertise. expresso will choose not to advertise and beantown will choose to advertise. both firms will choose to advertise. both firms will choose not to advertise.