empire - students F23 (1)
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Jan 9, 2024
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Case 11: Empire Group Limited
Empire Prep Assignment
submit single
pdf file
to Learn by 8a.m. Monday Nov 27th
•
Assess the situation arising in the case.
•
Analysis: Estimate the value of
Oshawa
as a stand-alone company, and the value of the projected synergies with Empire.
Recommendation 1:
How much (total $) would you offer? Why?
Additional information: the offer to Oshawa shareholders will include cash and shares as consideration. The shares will be in
Newco's
equity;
the cash payment will include $200M directly from
Empire
plus the proceeds from
new debt
issued by
NewCo
.
•
Analysis:
Use the TEV/EBITDA method to value
Empire's Food Division
, assuming 37% of Empire's EBITDA is attributable to the Food
Division.
•
Analysis: Estimate the TEV of NewCo (New Sobey's), a firm that merges Oshawa with the Empire Food division.
–
Estimate the Equity value of Newco = TEV – Debt value, given that no debt is transferred from
Empire
to Newco.
Recommendation 2: What combination of shares of Newco versus cash would you offer? [Hint: keep in mind the preferences of the main
stakeholders: The Wolfe's prefer mostly cash as payment; Empire requires majority ownership of all companies; target leverage is 30% for
Newco)].
Case Objectives:
•
Evaluate an M&A opportunity in the context of the Canadian grocery industry.
•
Identify strategic issues surrounding the bid.
•
Value the target (Oshawa) as a standalone firm
•
Evaluate additional synergies produced in an acquisition.
•
Incorporate a “pure play” restructuring
•
Recommend an amount to offer for the acquisition, and how to structure the deal to meet the
objectives of the main players.
Assess the situation
1.
Role: Who are we?
2.
Issue: Why are we here?
3.
Who are the
focal
stakeholders in the case?
4.
Alternatives: What
could
we possibly do?
5.
Criteria: To choose between the alternatives, what
matters
?
Qualitative analysis
•
What are the characteristics of the grocery business in Canada?
–
What are the key success factors?
•
What strengths and weaknesses does the Oshawa Group possess?
–
What are the synergies associated with a potential takeover offer?
•
What strategic issues are associated with a potential takeover offer ?
Quantitative Analysis:
Valuing Oshawa
Use the spreadsheet to determine:
•
The value of Oshawa Group as a stand-alone company, based on estimates obtained using:
i.
the DCF method (assume terminal growth rate = 5%), and a target Debt/Capital ratio of 30% (as
distinct from the current 12.4% in Exh 9). Assume moving to target leverage would decrease
their debt rating to “BBB”
ii.
the TEV/EBITDA multiple method (exh 9)
•
The value of the synergies (using the DCF method only)
•
The total value of Oshawa to Empire (i.e., the maximum Empire can pay before the NPV of the
acquisition goes negative).
•
The total value created (total NPV) of the deal.
•
How much to bid, using information in the case (precedent transactions, assessing the situation,
judgement)
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Related Questions
Complete solution of required 1 and 2 please. Thanks.
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Hi there can you please assist on the following below
You have just graduated and landed a job as a junior analyst in the Equities Division of Waya WayaBank Ltd. Your manager has presented you with the following information.
Company A
Company B
Share price
R 50
R 40
No. of ordinary shares in issue
10 Million
12 Million
Annual Earining per share
R 50 Million
R 50 Million
Earnings per share
R 5.00
R 4.17
Dividend payout ratio
30%
?
dividend yield
?
5%
Q.1.1. Calculate the price earnings ratio for both companies
Q1.2. Assiming that company a has dividend payout ratio of 30%; calculate the dividend per share for company A
Q.1.3. Calculate the dividend yield for company A
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Not a previously submitted question.
Thank you
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please explain give me
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Question 2
Optimust Berhad (Optimust) is a manufacturing company. It is currently considering taking over
another company, known as Bumblebeet Berhad (Bumblebeet). The board of directors of
Optimust Berhad intends to make a bid soon and has now approached you to assist them to
ascertain a value on Bumblebeet. You are given the following information:
Optimust Bumblebeet
Number of ordinary shares in issue 5 million 1 million
Price per share
RM5
RM3
Both Optimust and Bumblebeet are 100% owned by their shareholders. Optimust estimates that
the value of the synergistic benefit from acquiring Bumblebeet is RM300,000.
Optimust is evaluating two possible options as follows:
i. To pay RM2.50 in cash for every share of Bumblebeet
ii. To offer its 5% of unit shares in issue to Bumblebeet's shareholders
From the above information you are required to:
a. Calculate the value of Bumblebeet to Optimust.
b. Determine the Net Present Value (NPV) for each option.
c. Based on the NPV (in part b), choose…
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Jitu
Don't upload any image please
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QUESTION TWO
A. What is a financial market?
B. The directors of a company are planning to undertake a rights issue. Describe the
factors that should be taken into account in deciding whether to have this issue
underwritten instead.
C. D Plc is in the process of making a 1 for 4 rights issue. The rights letters have just
been sent to shareholders. The company currently has 20m K1 shares in issue
and the current market price is K4.50 per share. The rights letter gives
shareholders the right to buy their new shares for K3.50 each. D Plc plans to use
the cash raised to build a major extension to its factory, thereby doubling
production capacity. The finance director has received an angry letter from a
shareholder. The shareholder complains that he cannot afford to invest in new
shares. He contends that he is likely to suffer a loss because of the fact that the
market will be flooded with cheap shares as the issue will almost certainly
decrease the value of his holding.
Required:
I.
II.…
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Solve the problem
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Please help me
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May I ask for an explanation and solution to the question for a better understanding. Thank you!
What is Moore's rate of return on average shareholders' equity for 2021?
a. 16.0%
b. 20.0%
c. 23.5%
d. 26.0%
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13
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Need answer
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Your Question :Your Question :Your Question :Your Question :help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working!!!!
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The following financial information this question solution
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Please solve questions in a)
vi)
vii)
viii)
and question b)
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What is the solution and the working
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Calculating Costs of Issuing Stock Paige's Purses, Inc. needs to raise $25.20 million to finance plant expansion. In discussions with its investment bank, Paige's learns that the bankers recommend an offer price (or gross proceeds) of $52 per share and Paige's will receive $45.50 per share. What is the underwriter's spread per share on the issue?
Multiple Choice
$45.50
$6.50
$52
$0
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klp.4
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Answers already given. Only need solutions for the answers. Provide complete solution
6. The following shareholders’ equity accounts are included in the statement of financial position of KiwiCo. on December 31, 2020.• Preference share capital, 8%, P100 par (200,000 shares authorized, 60,000 shares issued andoutstanding)- P6,000,000• Ordinary share capital, P5 par (2,000,000 shares authorized, 600,000 shares issued and outstanding)-P3,000,000• Share premium- P3,750,000• Retained earnings- P3,500,000In 2021, Kiwi took part in the following transactions concerning equity.1. Paid the annual 2020 P8 per share dividend on preference shares and a P2 per share dividendon ordinary shares. These dividends had been declared on December 31, 2020.2. Purchased 81,000 shares of its own outstanding ordinary shares for P40 per share.3. Reissued 21,000 treasury shares for land valued at P900,000.4. Issued 15,000 preference shares at P105 per share.5. Declared a 10% stock dividend on the outstanding…
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Assignment Content
1. Determine the Basic and Diluted Earnings Per Share for Company X.
All necessary Information is listed below. Show your calculations.
2. In 100 words, or fewer, explain why investors should be more interested in the the Diluted EPS number than the Basic EPS number.
Company X information for Diluted Shares calculations for period 201X: Earnings for Year 201X - $20 million Average Basic shares outstanding for Company X in 201X – 10 million Average Stock Price for year 201X - $6.00 Warrants to purchase common shares: - Warrants A to purchase 2 million shares ex @ $2.00 - Warrants B to purchase 3 million shares ex @ $5.00.
Assume the A and B Warrants are the only additional securities outstanding (besides the basic shares) for Company X in 201X.
Hint: Carefully Review PowerPoint lecture slides 7 - 12, Text pages 245 -246, and the Podcast. Also, there is nothing wrong with looking up other Diluted EPS definitions online.
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1
The Welcome Home Company has issued rights to its shareholders . The stock is currently selling for $ 25 rights - on . It requires 6 rights and $ 21 to participate in the offering . What is the value of one right ? Select one : a $ 1.27 b . $ 3.57 c. $ .67 d . .57please answer right way, I need it as soon as possible!!!
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Question 2
Teleflex plc is large multinational company in the power industry. The company needs to
raise finance for expansion and is planning to raise this finance by listing and selling shares
on the Stock Exchange. The finance director has asked for your assistance in preparing
certain figures and reports for consideration by the management board.
The extracts from Teleflex plc's financial statements are shown below:
Profit attributable to the ordinary shareholders for the year
ended 31 March 2020
Number of ordinary shares in issue at 1 April 2019
£425,000
4,000,000
Teleflex plc issued one new share for every four existing shares held by way of a rights issue
on 1 October 2019; the value of the rights was 50p per share on 1 October 2019. The share
price before the issue was £1.00 per share.
Required:
With reference to IAS 33, Earnings per Share (EPS):
a) Calculate the basic earnings per share to be reported in the financial statements of
Teleflex Plc for the year ended 31 March…
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A. What amount should be reported as basic earnings per share?
B. What amount should be reported as diluted earnings per share?
Solution in proper accounting form.
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EXERCISL
Multiple Choice. Encircle the letter of the corresponding correct answer. Refer to the problem below.
The Board of Directors of Merck Ferries Incorporated at their meeting on May 19, 2020 declared a P10 cash
dividend payable on September 17, 2020 to shareholders on record an July 13, 2020. The number of shares issued and
outstanding were 5,000 shares with par value of P100 per share.
1. How much amount of cash dividend should be declared?
P40.000
b.
a.
P45,000
P50,000
d. None of these
C.
2. When Merck declared dividends, the first journal entry would be recorded on?
May 19, 2020
b.
a.
July 31, 2020
September 17, 2020
d.
C.
December 31, 2020
3.
On what date will there be no journal entry to be made?
a.
May 19, 2020
b
July 31, 2020
C. September 17, 2020
d. None of these
The final journal entry with regard to Merck's dividend declaration for 2020 will be made on?
4.
May 19, 2020
b.
a.
July 31, 2020
September 17, 2020
d.
C.
December 31, 2020
5.
What is the entry to record the…
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Related Questions
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