Consider the following premerger information about Firm X and Firm Y: Firm X Firm Y Total earnings $ 95,000 $ 22,000 Shares outstanding 52,000 17,000 Pre-share values: Market $ 52 $ 21 Book $ 15 $ 10 Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $6 per share, and that neither firm has any debt before or after the merger. a. Assuming the pooling of interests method is used, what is the equity of the combined firm? Equity value $ b. List the assets of the combined firm assuming the purchase accounting method is used. Assets from X $ Assets from Y Goodwill Total Assets XY $ Please dont provide solution image based thnx

Consider the following premerger information about Firm X and Firm Y: Firm X Firm Y Total earnings $ 95,000 $ 22,000 Shares outstanding 52,000 17,000 Pre-share values: Market $ 52 $ 21 Book $ 15 $ 10 Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $6 per share, and that neither firm has any debt before or after the merger. a. Assuming the pooling of interests method is used, what is the equity of the combined firm? Equity value $ b. List the assets of the combined firm assuming the purchase accounting method is used. Assets from X $ Assets from Y Goodwill Total Assets XY $ Please dont provide solution image based thnx

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 28E

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Consider the following premerger information about Firm X and Firm Y: Firm X Firm Y Total earnings $ 40,000 $ 15,000 Shares outstanding 20,000 20,000 Per-share values: Market $ 49 $ 18 Book $ 20 $ 7 Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $4 per share. Assuming that neither firm has any debt before or after the merger, what are the total assets of Firm X after the merger?
M’s Club is attempting to acquire the V’s Club. Certain financial data on these corporations aresummarized in the following table.Item M’s Club V’s ClubEarnings available for common stock $20,000 $8,000Number of shares of common stock outstanding 20,000 4,000Market price per share $12 $24M’s Club has sufficient authorized but unissued shares to carry out the proposed merger.a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original sharesof each firm?b. Repeat part a if the ratio of exchange is 2.0.c. Repeat part a if the ratio of exchange is 2.2.d. Discuss the principle illustrated by your answers to parts a through c
Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 1,800 shares of stock outstanding at a market price of $40 a share. Firm B has 1,200 shares outstanding at a price of $47 a share. What is the value per share of the merged firm?
1.Firm A is planning on merging with the Firm B. Firm A will pay Firm B’s stockholders the current value the of their stock plus one-half on the synergy, which is $120, in shares of firm A. Firm A currently has 4000 shares of stock outstanding at a market price of $21 a share. Firm B has shares outstanding at a price of $10 a share. What is the value of the merged firms? A.$96240 B.$88120 C.$96000 D.$84120 E.$92360 2.Which of the following not true regarding financial statement A.Group financial statement be produced by each subsidiary as well as the parent entity B.Profit must be separated between members of the parent company and that of minority interest C.Minority interest share of equity represents that ‘part of a subsidiary’s equity not allocated to members of the parent company. D.Group financial statements must be produced by the parent entity only. E.None of the options provided.
Data for Henry Company and Mayer Services are given in the following table. Henry Company is considering merging with Mayer by swapping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. Item Henry Company Mayor Services Earnings Available for Common Stock $225,000 $50,000 Number of Shares of Common Stock Outstanding $90,000 $15,000 Market Price per Share $45 $50 Calculate the price/earnings (P/E) ratio used to purchase Mayer Services. Calculate the post-merger earnings per share (EPS) for Henry Company. Calculate the expected market price per share of the merged firm. Discuss this result in light of your findings in part a.
4. The following table shows pre-merger data for ABC Company and XYZ, Inc. ABC XYZ No of share outstanding 2,000,000 5,000,000 EPS $2.50 $4.00 Price per share $15.00 $60 a) Assume XYZ is taking over ABC by issuing one of its shares for four shares of ABC. If there is no synergy, what would be the post-merger share price of XYZ? What would be the NPV of the merger? b) Assume there is synergy value of $4,200,000 created from the merger. What would be the post-merger price per share of XYZ? What would be the NPV of the merger? 5. Lazos Company is in distress mainly due to its failure to adopt the current technology. Creditors took Lazos to bankruptcy court and Lazos is fighting for a reorganization. The following is its condensed balance sheet. Book Value Market Value Current assets $ 120,000.00 $ 100,000.00 Machinery 200,000.00 150,000.00 Other fixed…
Use the following information for the next two problems. EPS and merger terms Expanding Corporation is interested in acquiring Target Company by swapping 0.4 share of its stock for each share of Target's stock. Expanding Co. has sufficient authorized but unissued shares to carry out the proposed merger. Certain financial data on these companies are given in the following table. Item Expanding Co. Target Co. Earnings Available for common stock $200,000 $50,000 Number of shares of common stock outstanding 50,000 20,000 Earnings per share (EPS) $4.00 $2.50 Market price per share $50 $15 Price/earnings (P/E) ratio 12.5 6 How many new shares of stock will Expanding have to issue to make the proposed merger? If the earnings for each firm remain unchanged, what will the post-merger earnings per share be?
A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows: Minnie Corporation Mickey Corporation Total earnings $1,682,000 $2,581,000 Number of shares of stock outstanding 290,000 890,000 EPS $5.80 $2.90 P/E ratio 10X 20X Market price per share $58 $58 a. On a share-for-share exchange basis, what will the postmerger EPS be? (Round the final answer to 2 decimal places.) Postmerger earnings per share $ b. If Mickey Corporation pays a 25 percent premium over the market value of Minnie Corporation, how many shares will be issued? (Do not round intermediate calculations.) Shares issued shares c. With the 25 percent premium, what will the postmerger EPS be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Postmerger earnings per share $
Data for Henry Company and Mayer Services are given in the following table : Item Henry Company Mayer Services Earnings available for common stock $195,000 $45,000 Number of shares of common stock outstanding 75,000 25,000 Market price per share $31 $23 Henry Company is considering merging with Mayer by swapping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. d. Calculate the post-merger earnings per share (EPS) for Henry Company. e. Calculate the expected market price per share of the merged firm.
Use the following information for the next two questions. Tangy is attempting to acquire Target. Tangy has sufficient authorized but unissued shares to carry out the proposed merger. Selected financial data is presented for both companies in the table below: Item Tangy Target Co. Earnings Available for common stock $10,000,000 $1,000,000 Number of shares of common stock outstanding 1,000,000 50,000 Market price per share $100 $120 Calculate the EPS of Tangy and Target before the merger. 2. If the ratio of exchange is 1.8, what will be the earnings per share of the merged company?
EPS and merger terms Expanding Corporation is interested in acquiring Target Company by swapping 0.4 share of its stock for each share of Target's stock. Expanding Co. has sufficient authorized but unissued shares to carry out the proposed merger. Certain financial data on these companies are given in the following table. Item Expanding Co. Target Co. Earnings Available for common stock $200,000 $50,000 Number of shares of common stock outstanding 50,000 20,000 Earnings per share (EPS) $4.00 $2.50 Market price per share $50 $15 Price/earnings (P/E) ratio 12.5 6 How many new shares of stock will Expanding have to issue to make the proposed merger? If the earnings for each firm remain unchanged, what will the postmerger earnings per share be?
Data for Henry Company and Mayer Services are given in the following table : Item Henry Company Mayer Services Earnings available for common stock $195,000 $45,000 Number of shares of common stock outstanding 75,000 25,000 Market price per share $31 $23 Henry Company is considering merging with Mayer by swapping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. a. Calculate the ratio of exchange in market price. b. Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company. c. Calculate the price/earnings (P/E) ratio used to purchase Mayer Services.