Rationally financing an acquisition

Tumellano Sebehela

Journal of Economics and Business, 2015, vol. 81, issue C, 20 pages

Abstract: This paper explores benefits of debt and equity in financing REIT acquisitions within the OPT framework. The Margrabe formula is altered in order to incorporate debt and equity. Scale invariance illustrates that debt and equity funding in REIT M&A increases the PV of receiving the stock in future if and only if the option finishes in-the-money position. On the other hand, funding has similar effects in Margrabe, B-S and asset or nothing formulas.

Keywords: Exchange option (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:81:y:2015:i:c:p:1-20

DOI: 10.1016/j.jeconbus.2015.05.004

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