erging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18% 1.) How much is the intrin
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ABC will be merging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required
1.) How much is the intrinsic value of the merged entity?
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- ABC will be merging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18%. *How much is the value of synergy of the merger?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?Firms A and B were each currently worth $50 million but generated a $20 million gain when merged. If the cost of the merger was $5 million, how much did firm A pay for firm B?
- Warehouse Stationary is planning on merging with Whitcoulls. Warehouse's will pay Whitcoulls's shareholders the current value of their stock in shares of Warehouse's Equipment. Warehouse's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Whitcoulls's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm assuming there is no synergy?ABC and XYZ have total equity values of P5,000,000 and P10,000,000 respectively. If they merged, a total of 30,000 P500-par value shares may be issued. Each share can provide investors a rate of return of 18%, a growth rate of 3% and annual dividends of P78 per share for the first year. What is the total value of synergy that the merger will provide?Aussie Ltd is considering the acquisition of Kiwi Ltd. The values of the two companies as separate entities are $20 million and $10 million, respectively. Each firm has 2 million shares outstanding. Aussie estimates that by combining the two companies, it will reduce the selling and administrative costs by $150,000 p.a. in perpetuity with no change in risk. Assume the cost of capital for the new firm is 10% p.a. What is the total gain, in present value terms, from the merger? a. $500,000 b. $150,000 c. $1,500,000 d. $1,000,000 e. None of the above
- Parentis 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?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)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%.
- 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?Kunla Ltd and Cunta Ltd intend to merge. The following were observed just before the merger announcement. Kunla Ltd Cunta Ltd Market price per share GH¢ 400 GH¢200 Number of shares 2,000,000 1,000,000 Market value of firm GH¢ 800,000,000 GH¢ 200,000,000 The proposed merger will create GH¢50,000,000 in synergies. Kunla Ltd intends to pay GH¢ 130,000,000 cash for Cunta Ltd. What is the cost of the merger to Kunla Ltd? Compute the NPV of the merger. The managers of these firms have proposed to merge to diversify their activities and to reduce risk. Should you pay a premium for the merged firm? What convincing reasons can these managers give for the proposed merger? What roles do investment banks play in facilitating M&A deals?Tom Corporation is considering the acquisition of Jerry Corporation. Jerry Corporation has free cash flows to debt and equity holders of $3,750,000. If Tom Corporations acquires Jerry Corporation, Jerry will reduce operating costs by $1,500,000. This will increase free cash flow to $4,900,000. Assume that cash flows occur at year-end and the weighted average cost of capital is 9%. a. What is the value of Jerry Corporation without a merger? o. What is the value of Jerry Corporation with the merger?
