FUND.OF CORP.FIN.(LL)-W/ACCESS >CUSTOM<
11th Edition
ISBN: 9781259898549
Author: Ross
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 26, Problem 2QP
Summary Introduction
To construct: The post-merger balance sheet for Company X.
Introduction:
A merger is the total absorption of one company by another, where the firm that is acquiring retains its uniqueness and it terminates the other to exist as an individual entity.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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?
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.
34. Firm B's one million shares of stock currently sell for $20 each. Firm A estimates the economic gain from the merger to be $10 million and is prepared to offer $22 cash for each share of B. What percentage of the merger gain will be captured by firm B's shareholders?A. 20.00%B. 33.33%C. 50.00%D. 60.00%
Chapter 26 Solutions
FUND.OF CORP.FIN.(LL)-W/ACCESS >CUSTOM<
Ch. 26.1 - Prob. 26.1ACQCh. 26.1 - Prob. 26.1BCQCh. 26.2 - Prob. 26.2ACQCh. 26.2 - Prob. 26.2BCQCh. 26.3 - Prob. 26.3ACQCh. 26.3 - Prob. 26.3BCQCh. 26.4 - Prob. 26.4ACQCh. 26.4 - Prob. 26.4BCQCh. 26.5 - Prob. 26.5ACQCh. 26.5 - Prob. 26.5BCQ
Ch. 26.6 - Prob. 26.6ACQCh. 26.6 - Prob. 26.6BCQCh. 26.7 - Prob. 26.7ACQCh. 26.7 - Prob. 26.7BCQCh. 26.8 - Prob. 26.8ACQCh. 26.8 - Prob. 26.8BCQCh. 26.9 - Prob. 26.9ACQCh. 26 - Prob. 26.3CTFCh. 26 - What factors should be considered when deciding...Ch. 26 - Prob. 1CRCTCh. 26 - Prob. 2CRCTCh. 26 - Prob. 3CRCTCh. 26 - Prob. 4CRCTCh. 26 - Prob. 5CRCTCh. 26 - Prob. 6CRCTCh. 26 - Prob. 7CRCTCh. 26 - Prob. 8CRCTCh. 26 - Prob. 9CRCTCh. 26 - Prob. 10CRCTCh. 26 - Prob. 1QPCh. 26 - Prob. 2QPCh. 26 - Prob. 3QPCh. 26 - Prob. 4QPCh. 26 - Prob. 5QPCh. 26 - Prob. 6QPCh. 26 - Prob. 7QPCh. 26 - Prob. 8QPCh. 26 - Cash versus Stock as Payment [LO3] In the previous...Ch. 26 - Prob. 10QPCh. 26 - Prob. 11QPCh. 26 - Prob. 12QPCh. 26 - Prob. 13QPCh. 26 - Prob. 14QPCh. 26 - Prob. 1MCh. 26 - Prob. 2MCh. 26 - Prob. 3MCh. 26 - Prob. 4M
Knowledge Booster
Similar questions
- 1. As a result of the merger, what is the goodwill? 560,000 638,500 650,000 11,500 2. what is the Retained Earnings after the merger? 10,465,250 10,269,250 10,350,500 10,280,750 3. what is the net increase or (decrease) in the stockholders' equity of SD Corp. after the merger? P8,904,250 P8,709,250 (P7,604,250) P7,604,250arrow_forwardConsider 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 thnxarrow_forward4. 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…arrow_forward
- 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?arrow_forwardMerger Valuation with the CAPV Model Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has 1 million shares outstanding and a target capital structure consisting of 30% debt; its current beta is 1.60 (i.e., based on its target capital structure). Vandell’s debt interest rate is 7.7%. Assume that the risk-free rate of interest is 4% and the market risk premium is 8%. Both Vandell and Hastings face a 40% tax rate. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.6 million, $2.7 million, $3.4 million, and $3.62 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $10.73 million in debt (which has a 7.7% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.6 million each year for Years 1, 2, and 3. After…arrow_forwardMerger Valuation with the CAPV Model Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has 1 million shares outstanding and a target capital structure consisting of 30% debt; its current beta is 1.60 (i.e., based on its target capital structure). Vandell’s debt interest rate is 7.7%. Assume that the risk-free rate of interest is 4% and the market risk premium is 8%. Both Vandell and Hastings face a 40% tax rate. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.6 million, $2.7 million, $3.4 million, and $3.62 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $10.73 million in debt (which has a 7.7% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.6 million each year for Years 1, 2, and 3. After…arrow_forward
- 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?arrow_forward(please correct answer and) Question 26 Firm A and Firm B are both all - equity firms. Firm A has 2,200 shares outstanding at a market price of $16 per share. Firm B has 4,020 shares outstanding at a market price of $18 per share. Firm B is acquiring Firm A for $30,000 in cash. The incremental value of the acquisition is $3,400. What is the net present value of the acquisition? $840-$990-$1,020 $ 8,600 $9,050arrow_forwardBoth of Firm A and Firm B are 100 equity firms. You estimate that the incremental value of the acquisition is $100,000. Firm B has indicated that it will agree to a sale if the price is $150,000, payable in cash or stock. Firm B is worth $100 as a stand-alone, so this is the minimum value that we could assign to Firm B. Should Firm A acquire Firm B? Explain 2 reasons of mergers. Firm A Firm B Price per share $2 $1 Number of shares 50,000 100,0000arrow_forward
- 7. Nine Ltd. wants to buy Fairfax Ltd. The market value of Nine’s equity prior to the merger announcement is $33 million, or $3 per share. The market value of Fairfax’s equity prior to the merger announcement is $10 million or $2 per share. Merging the two companies is expected to generate $5 million of synergies. Nine has determined that Fairfax shareholders will accept an offer of 4 million newly issued shares of Nine for all the shares of Fairfax. Assuming no taxes or inside information, what would be the cost of the acquisition if Nine uses shares to acquire Fairfax?arrow_forwardDo solve both parts Question 9 a) Company A has a present value of £78 million and Company B has a present value of £14 million. Merging the two would enable cost savings with a present value of £5 million. Company A acquires 100% of shares in Company B for £18 million. What do Company B’s shareholders gain from this acquisition? b) Deepings Company has a P/E ratio of 9.6 and a share price of £1.52. What are the earnings per share of the company?arrow_forwardRatio of exchange and EPS Marla’s Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table. Marla’s Cafe has sufficient authorized but unissued shares to carry out the proposed merger. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares of each firm? Repeat part a if the ratio of exchange is 2.0. Repeat part a if the ratio of exchange is 2.2. Discuss the principle illustrated by your answers to parts a througharrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
