A Corp. and B Company will be merging. Independently, A has forecasted annual earnings of P400,000 and overall return of 16%. On the other hand, B had dividends of P480,000 last year, an overall return of 15% and a payout ratio of 80%. Once combined, they will have a total equity value of P7,300,000. How much is the value of synergy between the two entities?
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A Corp. and B Company will be merging. Independently, A has
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- Assuming the following facts, what is the value of XYZ Corporation to JKL Enterprises?XYZ’s post-merger cash flows in Years 1–3 are estimated to be $7 million, $10 million,and $12 million, respectively. In addition, its continuing value in Year 3 is $318million. The firm’s cost of equity is 10%, and its growth rate is 6%.Assuming the following facts, what is the value of XYZ Corporation to JKL Enterprises? XYZ's post-merger cash flows in Years 1-3 are estimated to be $7 million, $10 million, and $12 million, respectively. In addition, its continuing value in Year 3 is $318 million. The firm's cost of equity is 10%, and its growth rate is 6%. ($262.56 million)Cake World is considering purchasing a competitor, Cupcake. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake's year4 cashflows are expected to grow at a constant rate of 6% after year 4. Cupcake's post merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. Compute for the maximum bid price that Cake World can offer in the acquisition.
- Baldock Corp. has a market capitalization of $4000m, a total enterprise value of $8000m, an equity beta of 1.1 and a debt beta of 0.1. Royston Corp. has a market capitalization of $3000m, a total enterprise value of $9000m, an equity beta of 1.1, and a debt beta of 0.05. What would be the asset beta of the new conglomerate if Baldock and Royston were to merge? 0.6 0.51 0.49 0.3Parentis Ltd. has a value of $150million while the value of Sandis Ltd. is $70million. A merger between the two has just gone through and cost savings with a present value of $ 10million is expected to be achieved. Parentis Ltd. paid cash of $85million for the entire paid up capital of Company B.Requiredi. What is the value of the two firms after the merger? ii. Calculate the cost of the merger to the shareholders of Parentis Ltd.iii. What is the portion of the gain/loss due Parentis Ltd.’s shareholders?iv. From the perspective of the shareholders of Company A, is there an economicjustification for the merger?The managing directors of Track PLC are considering what value to place on Money Plus PLC, a company which they are planning to take over soon. Track PLC’s share price is currently £4.21, and the company’s earnings per share stand at 29p. Track’s weighted average cost of capital is 12%.The board estimates that annual after-tax synergy benefits resulting from the takeover will be £5m, that Money Plus’s distributable earnings will grow at an annual rate of 2% and that duplication will allow the sale of £25m of assets, net of corporate tax (currently standing at 30%), in a year’s time. Information relating to Money Plus PLC:Financial Position Statement of Money plus PLC.£m Non-Current Assets 296 Current Assets 70366 Equity:Ordinary Shares (£1) 156 Reserves 75 2317% Bonds 83 Current Liabilities 52 Total Liabilities 366 Statement of Profit or Loss Extracts£m Profit before interest and tax 76.0 Interest payments 8.3 Profit before tax 67.7 Taxation 20.3 Distributable Earnings 47.4Other…
- Cake World is considering purchasing a competitor, Cupcake. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake's year4 cashflows are expected to grow at a constant rate of 6% after year 4. Cupcake's post-merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. Compute for the maximum bid price that Cake World can offer in the acquisitionThe Intelinet Corporation and Comp Inc. have assets of $100,000 each and a return on common equity of 17%. Intelinet has twice the debt of Comp Inc., while Comp has half the sales of Intelinet. If Intelinet has net income of 10,000 and a total assets turnover ratio of 3.5, what is Comp Inc.’s profit margin?Hasdwa Ltd is considering the acquisition of Patwa Ltd, currently Hasdwa has an annual earnings of Kshs 51 Million, 20 million ordinary shares outstanding and each share sells for Ksh130. Likewise the annual earnings for Patwa are Kshs9 million, 6 million ordinary shares outstanding and a market price per share of Kshs 160. Whereas the earnings of Hasdwa are expected to grow at the rate of 5% p.a those of Patwa Lts. Would grow at the annual rate of 12% p.a in the absence of any mergers. Hasdwa offers 1.5 shares for each share of Patwa. Assume that there are 110 synergistic effects likely from the merger. Required: Determine the effect of the acquisition on each company’s earnings per share
- The following data are pertinent for companies A and B. A B Present Earnings Shs 20 million Shs 4 million No of shares Sh10 million Sh 1 million Price/earning ratio 18 10 (a) If the two companies were to merge and the exchange ratio were one share of Company A for each share of Company B, what would be the initial impact on earnings per share of the two companies? what is the market value exchange ratio? Is the merger likely to take place? (b) If the exchange ratio were two shares of Company A for each share of Company B what would happen with respect to the above? (c) If the exchange ratio were 1.5 shares of Company A for each share of Company B, what would happen? (d)What exchange ratio would you recommend?The managing directors of Kings PLC are considering what value to place on Dragon PLC, a company that they are planning to take-over soon. Kings’ share price is currently £4.15and the company’s earnings per share stand at 29p. Kings PLC weighted average cost of capital is 12%. The board estimates that annual after-tax synergy benefits resulting from the takeover will be £5.25m, that Dragon’s distributable earnings will grow at an annual rate of 2.5%. That duplication will allow the sale of the £31m of assets, net of corporate tax (currently standing at 21%), in a year’s time. Information relating to Dragon PLC: Financial Statement of Dragon PLC £m £m Non-current assets 273 Current assets 56 Total assets…Wanbay Corporation is interested in estimating its additional financing needed to support a growth in sales next year. Last year, revenues were RM1million; net profit margin was 6 percent; investment in assets was RM750,000; payables and accruals were RM100,000; stockholders’ equity at the end of the year was RM450,000. The venture did not pay out any dividends and does not expect to pay dividends for the future. If the expected sales growth were only 15 percent, compute the change in the additional fund needed (AFN).