Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 31, Problem 8PS
a)
Summary Introduction
To determine: The missing figures.
b)
Summary Introduction
To determine: The number of shares exchanged
c)
Summary Introduction
To determine: Cost of merger for Company WE.
d)
Summary Introduction
To determine: Change in total market value of Company WE.
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Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial
data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in
this merger.
Sales (millions)
Net income (millions)
Koala
$90
$9.4
O a. $2.23
O b. $2.75
O c. $2.25
O d. $2.21
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$10
$1.2
Common shares outstanding (millions) 4.0
0.8
Earnings per share
$2.35
$1.50
Common stock (price per share) $35.00
$27.00
Calculate the post-merger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange
Ch. 29. Calculating Synergy. The Left Foot Company has offered $426 million cash for the common stock in the Right Foot Company. Based on recent market information, the Right Foot Company is worth $389 million as an independent operation. If the merger makes economic sense for Holmes, what is the minimum estimated value of the synergistic benefits from the merger? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
Round to the nearest dollar and format as "XX,XXX,XXX"
There are only five companies in the market. Company B and Company D are planning to merge. Market shares of all the competitors are shown in the table below.
Company
Market share, %%
A
4040
B
2525
C
1414
D
1212
E
99
Calculate the difference between the HHI value after the proposed merger and the initial value. Write the exact answer. Do not round.
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