BQ, Incorporated, is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information: BQiReportPrice-earnings ratio12.28.8Shares outstanding1,500,000165,000Earnings$ 4,600,000$ 680,000Dividends$ 960,000$ 410,000BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 4 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 6 percent per year.BQ’s outside financial consultants think that the 6 percent growth rate is too optimistic and a 5 percent rate is more realistic. f-1.What is the value of iReport to BQ now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)f-2.What would BQ’s gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)f-3.If BQ were to offer $36 in cash for each share of iReport, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)f-4.What’s the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)f-5.If BQ were to offer 190,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

The phrase "mergers and acquisitions" (M&A) refers to the combination of businesses or their key…

Answered: BQ, Incorporated, is considering making…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter22: Mergers And Corporate Control

Section: Chapter Questions

Problem 9MC

See similar textbooks

Related questions

Question

BQ, Incorporated, is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information:

	BQ	iReport
Price-earnings ratio	12.2	8.8
Shares outstanding	1,500,000	165,000
Earnings	$ 4,600,000	$ 680,000
Dividends	$ 960,000	$ 410,000

BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 4 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 6 percent per year.

BQ’s outside financial consultants think that the 6 percent growth rate is too optimistic and a 5 percent rate is more realistic.

f-1.	What is the value of iReport to BQ now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
f-2.	What would BQ’s gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
f-3.	If BQ were to offer $36 in cash for each share of iReport, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
f-4.	What’s the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
f-5.	If BQ were to offer 190,000 of its shares in exchange for the outstanding stock of iReport, what would the NPV be? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 8 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions