Homework Help is Here – Start Your Trial Now!
Business
Finance
ne financial manager of Apple Co. is evaluating Banana quisition. Banana Co. is expected to produce annual sh flows of P1,500,000. Apple Co. will assume P1,0 p.'s long-term liabilities. Apple Co.'s weighted average 2% and Banana Co.'s weighted average cost of cap Equisition will be evaluated as a perpetuity. Apple Co.'s ading at P25 per share with 1,000,000 shares outstanding

ne financial manager of Apple Co. is evaluating Banana quisition. Banana Co. is expected to produce annual sh flows of P1,500,000. Apple Co. will assume P1,0 p.'s long-term liabilities. Apple Co.'s weighted average 2% and Banana Co.'s weighted average cost of cap Equisition will be evaluated as a perpetuity. Apple Co.'s ading at P25 per share with 1,000,000 shares outstanding

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 8P
See similar textbooks
icon
Related questions
Question
The following information refers to Questions No. 13 through 15: The financial manager of Apple Co. is evaluating Banana Co. as a possible acquisition. Banana Co. is expected to produce annual after-tax operating cash flows of PI,500,000. Apple Co. will assume P1,000,000 of Banana Co.'s long-term liabilities. Apple Co.'s weighted average cost of capital is 12% and Banana Co.'s weighted average cost of capital is 15%. The acquisition will be evaluated as a perpetuity. Apple Co.'s common stock is trading at P25 per share with 1,000,000 shares outstanding and a P/E ratio of 10. Banana Co.'s stock is trading at P15 per share with 600,000 shares outstanding and a P/E ratio of 15. Based on this information, the estimated market value of the target- company is nearest P 9,000,000. b. 13. a. P10,000,000. P11,000,000. P11,500,000. с. d.
Transcribed Image Text:The following information refers to Questions No. 13 through 15: The financial manager of Apple Co. is evaluating Banana Co. as a possible acquisition. Banana Co. is expected to produce annual after-tax operating cash flows of PI,500,000. Apple Co. will assume P1,000,000 of Banana Co.'s long-term liabilities. Apple Co.'s weighted average cost of capital is 12% and Banana Co.'s weighted average cost of capital is 15%. The acquisition will be evaluated as a perpetuity. Apple Co.'s common stock is trading at P25 per share with 1,000,000 shares outstanding and a P/E ratio of 10. Banana Co.'s stock is trading at P15 per share with 600,000 shares outstanding and a P/E ratio of 15. Based on this information, the estimated market value of the target- company is nearest P 9,000,000. b. 13. a. P10,000,000. P11,000,000. P11,500,000. с. d.
14. If the exchange ratio is 0.8, then the amount that Apple Co. will be paying for Banana Co. is nearest P10,000,000. b. a. P11,000,000. P12,000,000. d. с. P18,750,000. If the exchange ratio is 0.8, then the estimated post-merger earnings per share for Apple Co. is nearest P5.17. 15. a. b. P1.77. c. Р3.10. d. P2.09.
Transcribed Image Text:14. If the exchange ratio is 0.8, then the amount that Apple Co. will be paying for Banana Co. is nearest P10,000,000. b. a. P11,000,000. P12,000,000. d. с. P18,750,000. If the exchange ratio is 0.8, then the estimated post-merger earnings per share for Apple Co. is nearest P5.17. 15. a. b. P1.77. c. Р3.10. d. P2.09.
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Receivables Management
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.
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
EBK CFIN
EBK CFIN
Finance
ISBN:
9781337671743
Author:
BESLEY
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Entrepreneurial Finance
Entrepreneurial Finance
Finance
ISBN:
9781337635653
Author:
Leach
Publisher:
Cengage
International Financial Management
International Financial Management
Finance
ISBN:
9780357130698
Author:
Madura
Publisher:
Cengage
SEE MORE TEXTBOOKS