erging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18% 1.) How much is the intrin

erging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18% 1.) How much is the intrin

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: 4.1 Calculate the combined value of the proposed acquisition. 4.2 Calculate the total number of…

A: SOLUTION:- 4.1 Combined value of the proposed acquisition will be: Value of Watford Refiners +…

Q: Bartlies Co is considering whether to acquire Indigo Inc. The values of the two companies as…

A: A key idea in finance and business is the "firm value," the other name of firm value is the…

Q: 2. An entity has 25% investment in ordinary share and 20% investment in preference share over the…

A: Accounting principles are general rules and guidelines that the company follows while recording and…

Q: 1.1 How much will the shareholders of Surrey Ltd gain or lose on a per share basis. 1.2 Determine…

A: SOLUTION:- 1. The shareholders of Surrey Ltd will gain R 2.29 per share (i.e. R 11.29 - R 9). 2.…

Q: Sweet Entertainment and Candy Broadcasting are all-equity firms. The Sweet Entertainmen (b) is…

A: Acquisition refers to the action of a company to take over another company to benefit from its…

Q: Tangy is attempting to acquire Target. Selected financial data is presented for both companies in…

A: Earning per share depicts the earnings of equity shareholders against the amount of capital invested…

Q: Kunla Ltd and Cunta Ltd intend to merge. The following were observed just before the merger…

A: The question is related to the Merger ans Acquisition. The details of two companies are given.…

Q: 1)A Bhd is planning to take over B Bhd. The growth rate of B Bhd is 5% in earnings and dividends. A…

A: i.) First calculate the required rate of return on B Bhd. r = D1P0+gr = D×(1+g)P0+gr =…

Q: Consider the following premerger information about Firm X and Firm Y: Total earnings Shares…

A: Since since no debt to the firms,Total assets of a firm = Number of shares * book value Existing…

Q: (b) of RM55 per shares. Jakel Development expects its shares to sell at the same price earnings or…

Q: Holmes, Inc., has offered $351,887 cash for all of the common stock in Watson Corporation. Based on…

A: In the given question we need to compute the minimum estimated value of the synergistic benefits…

Q: Wilson Industries is considering the acquisition of the Blanchard Company in a stock-for-stock…

A: In order to determine the earning per share, the earning available to equity shareholders are…

Q: According to Kaplan and Strömberg, approximately what percent of LBO-acquired firms are acquired in…

A: In this question, we are required to determine the percentage of firms acquired in the second…

Q: An acquirer with a P/E ratio of 13 and earnings of $1.99 seeks to take over another target firm with…

A: The combined P/E ratio is calculated by dividing the combined value by the combined earnings.

Q: I dont understand part d. Please expalin in simple steps

A: .Premium % is computed by following formula-Premium % =

Q: Use the following information for the next two questions. Tangy is attempting to acquire Target.…

A: The question is based on the concept of Financial Accounting.Earning per share can be calculated by…

Q: If the purchase price is 500000 OMR under IFRS, the market value of the net assets is 450000 OMR and…

A: NCI is the residual interest in the subsidiary entity other than the parent interest. NCI at…

Q: Thermo Fisher ("Fisher") is considering an acquisition of Life Technologies ("Life Tech"). Life Tech…

A: Synergy is the extra value that is generated when two or more companies merge and work as a single…

Q: here are only five companies in the market. Company B and Company D are planning to merge. Market…

A: The Herfindahl-Hirschman Index (HHI) is an index that measures the market concentration of an…

Q: Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm…

A: Pre-merger Value A=$600m Pre-merger Value B=$475m Post-merger Value A + B=$1,200m Cash Offer=$630m…

Q: Excel Online Structured Activity: Merger Valuation with Change in Capital Structure Hastings…

A: 1. Calculate the Weighted Average Cost of Capital (WACC) for Vandell (Pre-Merger):a. Calculate the…

Q: Washington Company is considering an acquisition of Purple Turtle Corp. Washington Company estimates…

A: Free cash flow of equity (FCFE) is the value that is available for the distribution to the equity…

Q: The following are the condensed balance sheet of GM and SR on January 01, 2018: GM P 10,250,000 P…

A: Solution 1. Calculation of goodwill Step 1 Consideration transferred by…

Q: EPS and postmerger price Data for Henry Company and Mayer Services are given in the following table,…

A: As per guideline policy, if more than 3 sub parts asked in a single question. I can solve only 1st 3…

Q: Pearl, Inc. has offered $790 million cash for all of the common stock in Jam Corporation. Based on…

A: We have to estimate the minimum synergy possible so that the merger makes an economic sense.

Q: Lion Bank had $150 million in assets and $60 million in expenses before the acquisition of Sell…

A: Acquisition means a buying of firm by another firm. It generally done by the business to achieve…

Q: ABC Corporation will be acquiring XYZ Corporation. The latter's fair value has not yet been…

A: In the context of the given question, we need to determine the value of control over XYZ company…

Q: Prior to a potential merger Veggie Co has 4400 shares outstanding at a market price per share of…

A: Synergistic benefits are earned by the acquirer when acquiring the target in the form of increased…

Q: Thermo Fisher (“Fisher”) is considering an acquisition of Life Technologies (“Life Tech”). Life Tech…

A: Number of Life Tech shares outstanding = 179.3 million Share price = $60.75Number of Fisher shares…

Q: What is the cost of capital for the acquisition? 2. What is the value of Tiffany & Co. ? 3. How much…

A: The acquisition Benefits both LVMH and Tiffany and Co with LVMH expanding its luxury portfolio and…

Q: SD acquired the net assets of both GM and SR. Paying cash in the amount of P185,000 and by issuing…

A: A merger refers to the business arrangement under which two existing companies form the new company.…

Q: rior to a potential merger Ross Co has 4500 shares outstanding at a market price per share of $31.…

A: Any amount that is paid in excess of the cost of the target firm for the purpose of a merger or…

Q: Firms A and B were each currently worth $50 million but generated a $20 million gain when merged. If…

A: Answer Firm b current worth = $50 million Gain when merged from A and B = $20 million Expenses of…

Q: 2nd Quarter 350,000 340,000 365,000 465,000 Provide the under/(over) valuation of the entity to be…

A: The price-to-earnings ratio (P / E) is related to the company's price and earnings per share. A high…

Q: Both of Firm A and Firm B are 100 equity firms. You estimate that the incremental value of the…

A: Merger is the concept of two or more company combined together and form a new company or one company…

Q: G is negotiating an acquisition of K. The tentative agreed upon value is $27 per share (all cash…

A: The post-merger value of the combined company represents the total value of the merged entity after…

Q: Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is…

Q: Consider the following information about Firm A and Firm T: Item Firm A (Aquiring Firm Firm T…

A: According to the question given, we need to compute the merger premium.Consolidations:Consolidations…

Q: Wagirin.Ltd, a retail company, wants to acquire Sabeni.Ltd, a merchandise company. The value of the…

A: The question is to explain the architecture of the aquisition of a company. The acquisition decision…

Q: Consider the

A: Mergers and acquisitions are business transactions in which the ownership of companies,…

Q: If Genie went ahead with the acquisition of Aladdin, what is the total value of the acquisition? (…

A: Value of acquisition means the price paid by an organization to acquire a new purchaser or for the…

Question

ABC will be merging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18%

1.) How much is the intrinsic value of the merged entity?

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Northwest supply co. has 1209 shares outstanding at a market price of $20.65 per share. Radio Supply has 5,000 shares outstanding at a market price of $36.75 per share. Neither firm has any debt. Radio Supply is acquiring Northwest Supply. The incremental value of the acquisition is $1800. What is the value of Noethqest Supply to Radio Supply? A) 26,580 B) 30,900 C) 24,780 D) 32,700 E) 25,780
Company A is considering the acquisition of Company B, and intends to finance this potential acquisition using only retained cash. Consider the information in Table 2 about Companies A and B, expected synergies from the acquisition and price asked by Company B's shareholders to sell their company. Table 2 A Current market value (€) 700 420 Number of shares 100 40 Expected synergies from acquisition (€) 80 Value asked by Company B's shareholders (€ ) 560 To answer the following questions make plausible assumptions if necessary. a. What is the expected combined value after acquisition? Explain your answer. b. Should A acquire B by €560? Explain your answer. c. Consider the scenario where Company A decides to finance the acquisition with equity instead of cash. What would be the optimal exchange ratio of Company Av ersus Company B shares? Explain your answer.
Assets Cash Receivables (net) Inventory PP & E (net) Patents&Licenses Goodwill Total assets Liabilities & Equity Accounts payable Short term debt Long term debt Preferred stock Common Equity Total Liabilities + Equity New Chip Corp Balance Sheet at 12/31/22 ($ in Millions) 31 45 64 215 28 19 402 53 19 179 23 128 402
Mammoth Inc. is acquiring Snail Ltd. Mammoth's share price is $50 and Snail's share price is $10. Both firms have 1 million shares outstanding. Mammoth expects a discounted synergistic value of $5 million from the merging of operations of the two firms. If Mammoth pays cash of $11.5 million to Snail's shareholders, what is the value of the merged firm? $68.5 million $65.0 million $60.0 million $63.5 million
Kk.415.
Veghie Co is acquiring Fruit Inc for $25,250 in cash. Veggie Co has 2350 shares outstanding at a market price per share of $39. Fruits Inc 1500 shares outstanding at $16 per share. Neither firm has outstanding debt. The incremental value (synergy) of the acquisition is $2300. What is the value of Veggie Co after acquisition? A) 92,700 B) 88,950 C) 56,650 D) 89,150 E) 73,750
Linpro Industries is considering the acquisition of Odetics Inc. in a stock-for-stock exchange. Assume no immediate synergistic benefits are expected. Selected financial data on the two companies are shown below: Linpro Odetics Sales (millions) $480 $90 Net income (millions) $38 $10.4 Common shares outstanding (millions) 10 2.1 Earnings per share $3.80 $4.95 Common stock (price per share) $45.60 $74.25 Calculate Linpro's post-merger EPS if the Odetics shareholders accept an offer of $90 a share in a stock-for-stock exchange. Question 9Answer a. $4.38 b. $3.81 c. $4.29 d. $3.42
Xterm R US has offered $178,500 cash for all of the common stock of Outdoor Co. Based on recent market information Outdoor Co is worth $174,200 as an independent operation. If the merger makes economic sense for Xterm R US, what is the minimum estimated value of the synergistic benefits from the merger? A)4300 B) 4730 C) 5160 D) 4000 E) 4945
A and B are merged. A is the acquiring firm, B is the acquired firm. The recorded value of B’s assets is 300.000.000 TL, liabilities of B is 140.000.000 TL. A paid 200.000.000 TL to merge with B. How much is the goodwill? Select one: 160.000 240.000 40.000 440.000.
(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 $9,050
Ex. 3 Company A is considering acquiring company B. Calculate the combined PV of Companies A and B, the goodwill and the net gain for the shareholders of company A and shareholders of Company B, considering the following financial information: Present value of Company A Present value of Company B Cost saving from merger of A and B Price A pay for B (EUR) 30 75 22 80 mn mn mn mn The present value of company B increase by EUR 7 mn on the back of rumors about the potential merger. Calculate the adjusted goodwill and adjusted gain for the shareholders of company A and shareholders of Company B after the rumors.
In a split - off transaction, if the subsidiary's book value is $150 million, and the parent company decides to distribute 80% of the subsidiary's book value to the shareholders of the new entity, how much will a shareholder holding 100 shares in the new entity receive in cash? Assume that the company has 1.25 million shares outstanding.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS