PRINCIPLES OF CORPORATE FINANCE
13th Edition
ISBN: 9781264052059
Author: BREALEY
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 31, Problem 16PS
Summary Introduction
To discuss: The effects on Company AB’s
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Explain how purchase accounting is implementedin a merger. Does the accounting profession nowrequire this method? How is any premium that theacquiring firm paid over the acquired firm’s bookvalue treated subsequent to a merger?
1. As a result of the merger, what is the goodwill2. What is the Retained Earnings after the merger?3. What is the net increase or (decrease) in the stockholders’ equity of SD Corp. after the merger?
Examine how do you treat the following items when X Ltd. is merging with Y Ltd. on 1st
January 2023 on the assumption:
A.
Condition u/s 2(1B) and u/s 72A does not satisfy
B. Condition u/s 2(1B) satisfy but conditions u/s 72A not satisfy
C. Conditions u/s 2(1B) and u/s 72A are satisfied
Other Information of X Ltd.:
(i) Business Profits (before adjusting losses and expenses)
*60,000
(ii) Expenses on merger
*2,00,000
(iii) VRS Compensation (Paid during 2020-21)
*4,00,000
(iv) Sale consideration of non-depreciable capital assets
*20,00,00
(v) Indexed cost of acquisition of non-depreciable capital assets
*12,00,000
(vi) Sale consideration of depreciable assets
*10,00,000
(vii) WDV of depreciable assets
*7,00,000
(viii) Non-speculation business loss relating to 1994-95
*3,00,000
(ix) Unabsorbed depreciation relating to 2020-21
1,50,000
(x) Long term Capital loss relating to 2021-22
*2,00,000
Business profits of Y Ltd. (before adjusting losses and expenses) ₹30,00,000 and long term
capital…
Knowledge Booster
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.Similar questions
- In the business combination of Polka and Spot Select one: a. all of the costs except those of registering and issuing the securities are included in the purchase price of Spot. b. the salaries of Polka's employees assigned to the merger are treated as expenses. c. only the accounting and legal fees are included in the purchase price of Spot d. the costs of registering and issuing the securities are included as part of the purchase price for Spot.arrow_forwardWhen one company buys the assets and liabilities of another company, this is known as which of the following?Choose one answer.a. Limited liability company b. Merger c. Conventional corporation d. Acquisitionarrow_forward33. A purchaser of a business will generally prefer which of the following? An asset purchase to receive new basis for depreciation A stock purchase because the seller will receive capital gains Utilizing a §338(g) election If the selling entity is an S Corporation making a joint §338(h)(10) election All of the above A,C,&D What form is required to report the allocation of the purchase price? ____________arrow_forward
- Bentley Corporation and Rolls Manufacturing are considering a merger. The possible states of the economy and each company's value in that state are shown here: State Boom Probability Bentley .70 $ 330,000 130,000 Recession .30 Rolls $300,000 100,000 Bentley currently has a bond issue outstanding with a face value of $145,000. Rolls is an all-equity company. a. What is the value of each company before the merger? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Value of Bentley Value of Rollsarrow_forwardMajan Group is considering the acquisition of Mazoon Company in which Mazoon Company would receive OMR 66.50 for each share of its common stock. The Majan Group does not expect any change in its price/earnings multiple after the merger. Majan Group is considering either undertaking the acquisition either through a stock for stock transaction, an all-cash transaction or in a stock and cash transaction. Majan Group intends to borrow the cash involved in the transaction in an interest only loan at an annual rate of 6% with the principal to be repaid as a in 15 years. If the stock and cash transaction is to be considered, Majan Group will pay a purchase price of one share of its stock plus a cash amount equal the difference between the offer share price and the target's share price. The marginal tax rate of Majan Group is 40%. Majan Group Mazoon Company Earnings available for common stock OMR 184,450 OMR 38,150 Number of shares of 81,900 24,500 common stock outstanding Market price per…arrow_forwardMajan Group is considering the acquisition of Mazoon Company in which Mazoon Company would receive OMR 66.50 for each share of its common stock. The Majan Group does not expect any change in its price/earnings multiple after the merger. Majan Group is considering either undertaking the acquisition either through a stock for stock transaction, an all-cash transaction or in a stock and cash transaction. Majan Group intends to borrow the cash involved in the transaction in an interest only loan at an annual rate of 6% with the principal to be repaid as a in 15 years. If the stock and cash transaction is to be considered, Majan Group will pay a purchase price of one share of its stock plus a cash amount equal the difference between the offer share price and the target's share price. The marginal tax rate of Majan Group is 40%.Majan Group Mazoon CompanyEarnings available for common stockOMR 184,450OMR 38,150Number of shares of common stock outstanding81,90024,500Market price per shareOMR…arrow_forward
- Describe some of the positives and negatives from the point of view of both the acquirer and the target in a merger. What is the usual impact on the stock prices of each?arrow_forwardA bargain purchase arises when the price paid to acquire a controlling interest in another company is less than the acquirer’s share of the fair value of net assets of the company being acquired. At the end of your preliminary analysis, you believe that a business combination results in a bargain purchase. What is your next step? A. Recognize an immediate gain in the consolidated statement of profit and loss without further analysis. B. Recognize a liability in the consolidated balance sheet. C. Contact the acquiree to confirm its intention. D. Reassess each step of your analysis to confirm your preliminary findings.arrow_forwardWhich of the following statements is most CORRECT? Oa. The primary rationale for most operating mergers is synergy. Ob. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms. Oc. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return. Od. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis. Oe. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.arrow_forward
- Majan Group is considering the acquisition of Mazvon Company in which Mazoon Company would receive OMR 66.50 for each share of its common stock. The Majan Giroup does not expect any change in its price/earnings multiple after the merger. Majan Group is considering either undertaking the acquisition either through a stock for stock transaction, an all-cash transaction or in a stock and cash transaction. Majan Group intends to borrow the cash involved in the transaction in an interest only loan at an annual rate of 6% with the principal to be repaid as a in 15 years. If the stock and cash transaction is to be considered, Majan Group will pay a purchase price of one share of its stock plus a cash amount equal the difference between the offer share price and the target's share price. The marginal tax rate of Majan Group is 40%. Majan Group Mazoon Company Earnings available for OMR 184,450 OMR 38,150 common stock Number of shares of 81,900 24,500 common stock outstanding Market price per…arrow_forwardCroatia 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) 0.4221arrow_forwardQuestion : Majan Group is considering the acquisition of Mazoon Company in which Mazoon Company would receive OMR 66.50 for each share of its common stock. The Majan Group does not expect any change in its price/earnings multiple after the merger. Majan Group is considering either undertaking the acquisition either through a stock for stock transaction, an all-cash transaction or in a stock and cash transaction. Majan Group intends to borrow the cash involved in the transaction in an interest only loan at an annual rate of 6% with the principal to be repaid as a in 15 years. If the stock and cash transaction is to be considered, Majan Group will pay a purchase price of one share of its stock plus a cash amount equal the difference between the offer share price and the target's share price. The marginal tax rate of Majan Group is 40%. Majan Group Mazoon Company Earnings available for common stock OMR 184,450 OMR 38,150 Number of shares of common stock outstanding 81,900 24,500 Market…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT