Albridge plc is planning to buy the whole of Woodier plc's equity for cash. At present no news has been officially released to the market, and senior management are concerned as to how the share price of Albridge plc will react to the news. They have agreed that the following timetable is appropriate, Note Day 0 is today:
Day 0: Share price of albridge plc =5.00 200M shares in issue
Share price of Woodier plc =2.00 50M shares in
Day 1: Albridge offers 2.40 per Woodier plc share
Day 3: Albridge plc expects savings as a result of the takeover of 10M p.a.. These will not be announced untill Day 6
Day 6: Albridge plc announces the saving of 10M p.a.
Albridge plc uses discount rate of 10%
Required:
Calculate the price of Albridges share price, given the information above, under conditions of semi strong, and strong from efficiency?