1. Solvay Business School – Université Libre de Bruxelles ABYZ (B) ABC All Belgian Cy XYZ Xenogenic Yellow Zymogen Earnings 8,500 Beta 0.70 Price/share € 12.50 Cash € 50,000 # shares 10,000 EPS 0.90 Beta 1.40 ABYZ All Belgian Yellow Zymogen Riskfree rate: 5% Exp.return on mkt portfolio: 10% Agreement signed €80,000 Cash paid out as dividend Corporate tax rate = 40%

2. Solvay Business School – Université Libre de Bruxelles Valuing the companies ABC EBIT 9,000 Net income5,400 WACC (= 5+5*1.4) 12% Mkt Value ( 5,400/0.12) 45,000 /# shares 10,000 Price per share 4.50 XYZ EBIT 8,500 Net income5,100 WACC (=5+5*0.7) 8.50% Mkt Value 5,100/0.135 60,000 NPV = 60,000 - 80,000 = - 20,000 NPV/share = -2€ Price per share after announcement = € 2.50

3. Solvay Business School – Université Libre de Bruxelles Comparing various financing strategies

4. Solvay Business School – Université Libre de Bruxelles Weighted Average Cost of Capital