EBK CORPORATE FINANCE
11th Edition
ISBN: 8220102798878
Author: Ross
Publisher: YUZU
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Chapter 29, Problem 3QP
Summary Introduction
To prepare: The post merger
Merger:
Merger occurs when the shareholders of two or more companies pool the resources of their company into one separate legal entity and as a result, a new company comes into existence. Merger is basically the result of merging two or more companies into one.
Purchase Accounting Method for Mergers:
In the purchase accounting method, the assets of the targeted company has to be recorded at the current market value in the books of the acquiring company and
Balance Sheet:
Balance sheet is the summarized statement of total assets and total liabilities of a company in an accounting period. It is one of the financial statements.
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Students have asked these similar questions
Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover.
Pre-merger Value A
$550m
Pre-merger Value B
$420m
Post-merger Value A + B
$1,150m
Cash Offer
$580m
Share Offer
52% of Shares in A + B
Estimate the gains available from the merger.
Estimate the value of the merger to firm A’s shareholders under both the cash and share offer.
Estimate the value of the merger to firm B’s shareholders under both the cash and share offer.
Which offer will predominate, cash or shares, if the shareholders of A are given the choice?
Required:
i)Determine the gain for World Cruise Bhd. when it acquires Sunrise Cruise Bhd.
(ii) World Cruise Bhd. is proposing to finance by cash the deal to purchase all of Sunrise Cruise Bhd.’s issued shares and is offering a premium of 25% over the market price of Sunrise Cruise Bhd.’s shares.Calculate the cost of acquisition of Sunrise Cruise Bhd.
(iii) Suggest what should be recommended by Jack Pang to the Board of Directors on the proposed acquisition of Sunrise Cruise Bhd. and why Sunrise’s shareholders should accept the offer.
Croatia Inc. is in the process of acquiring Vistara Inc. on a share exchange basis. The information related to the two companies is provided below.
Profit after tax
Shares outstanding
Earnings per Share
PE Ratio
EPS and
Croatia Inc.
$14,000,000
1,500,000
$8
15
As an analyst of Croatia Inc., you are required to calculate the following:
Pre-Merger Market Value per Share of both companies.
The maximum share exchange ratio Croatia Inc. can offer without the dilution of:
Market Value per Share
Vistara Inc.
$6,000,000
1,600,000
$5
10
Note: Do not round off any intermediate calculations. Only the rations shall be rounded off up to four decimals.
(1) Pre-Merger MV: Croatia Inc- $50. Vistara Inc. = $120.(1) (1) 0.6250 (2) 0.4167
(1) Pre-Merger MV: Croatia Inc. $120. Vistara Inc = $50. () (1) 0.6200 (2) 0.4221
(1) Pre-Merger MV: Croatia Inc.= $120, Vistara Inc. $50 (1) (1) 06250 (2) 04167
(1) Pre-Merger MV: Croatia Inc.= $110, Vistara Inc. = $120.) (1) 0.6200 (2) 0.4221
Chapter 29 Solutions
EBK CORPORATE FINANCE
Ch. 29 - Prob. 1CQCh. 29 - Prob. 2CQCh. 29 - Prob. 3CQCh. 29 - Prob. 4CQCh. 29 - Prob. 5CQCh. 29 - Prob. 6CQCh. 29 - Economies of Scale What does it mean to say that a...Ch. 29 - Prob. 8CQCh. 29 - Prob. 9CQCh. 29 - Prob. 10CQ
Ch. 29 - Prob. 1QPCh. 29 - Prob. 2QPCh. 29 - Prob. 3QPCh. 29 - Prob. 4QPCh. 29 - Cash versus Stock Payment Penn Corp. is analyzing...Ch. 29 - EPS, PE, and Mergers The shareholders of Flannery...Ch. 29 - Prob. 7QPCh. 29 - Cash versus Stock as Payment Consider the...Ch. 29 - Prob. 9QPCh. 29 - Prob. 10QPCh. 29 - Prob. 11QPCh. 29 - Prob. 12QPCh. 29 - Prob. 13QPCh. 29 - Prob. 14QPCh. 29 - Prob. 15QPCh. 29 - Prob. 16QPCh. 29 - Prob. 1MCCh. 29 - Prob. 2MCCh. 29 - Prob. 3MCCh. 29 - Prob. 4MC
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