Principal, Inc. is acquiring Secondary Companies for $29 million in cash. Principal has 2.5 million shares of stock outstanding at a market price of $30 a share. Secondary has 1.6 million shares of stock outstanding at a market price of $15 a share. Neither firm has any debt. The synergy gains of the acquisition is $4.5 million. What is the NPV of the acquisition?
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- NewCo is trying to fully acquire OldCo in an all cash offer. NewCo will assume all the debt of OldCo as part of the acquisition. The expected synergies from the acquisition are $700 million. Before the transaction OldCo has 25 million shares outstanding, a share price of $65, and outstanding debt of $500 million (no excess cash). Is the following statement true or false? If NewCo offers $65 per share of OldCo and the acquisition is successful, the shareholders of NewCo will have captured the full value of the synergies of this transaction. Pick One: True FalseNorthwest 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) 25,780b) Principal is acquiring Secondary Companies for $38,000 in cash. Principal has 4,500 shares of stock outstanding at a market price of $31 per share. Secondary has 1,600 shares of stock outstanding at a market price of $22 per share. Neither firm has any debt. The net present value of the acquisition is $2,400. What is the price per share of Principal after the acquisition?
- . Hannahs is considering the acquisition of Shoe Clinic. . Hannahs has 43,000 shares outstanding at a market price of $32 a share. Shoe Clinic has 12,800 shares outstanding priced at $44 a share. The acquisition is expected to create $5,400 of synergy. What is the maximum amount of cash Hannahs should pay for this acquisition?a) The market values of Alpha Corporation and Gamma Corporation are $2,500 and $900, respectively. Assume Alpha acquires Gamma at a cost of $1,000 and the transaction creates $100 in synergy. What would be the NPV of this acquisition to Alpha? b) Principal is acquiring Secondary Companies for $38,000 in cash. Principal has 4,500 shares of stock outstanding at a market price of $31 per share. Secondary has 1,600 shares of stock outstanding at a market price of $22 per share. Neither firm has any debt. The net present value of the acquisition is $2,400. What is the price per share of Principal after the acquisition?The financial manager of Company X is evaluating Company Y as a possible acquisition. Company Y is expected to produce annual earnings before interest and taxes P485,000. Depreciation write-off's on Company Y's assets are P120,000 annually. Both companies have a 34% marginal tax rate. If the merger takes place, Company X will assume P1,425,000 of Company Y's long-term liabilities. Company X's weighted average cost of capital is 9.25% and Company Y's weighted average cost of capital is 14.75%. The acquisition will be evaluated as a perpetuity. If Company X acquires Company Y for PI,125,000 in cash, then the estimated change in the combined wealth of Company X's shareholders will be nearest P433,729 increase. b. 10. a. P1,558,729 increase. P379,830 decrease. d. C. P2,207,838 increase.
- JJJCorporation is to be sold off by its shareholders. It currently has market values of debt and of equity at $20,000,000 and $25,000,000 respectively. The effective cost of debt is 12% while the cost of equity is 18%. Several analysts determined three potential acquirers who may be able to synergize with JJJ. The following returns from JJJ depending on the acquirer are as follows:" Acquirer Expected Firm Return G 20% H 24% I 18% Based on the above and assuming that liabilities will be retained by the entity, what is the highest selling price that the shareholders can get from the sale of JJJ?The financial manager of Company X is evaluating Company Y as a possible acquisition. Company Y is expected to produce annual earnings before interest and taxes P485,000. Depreciation write-offs on Company Y's assets are Pl20,000 annually. Both companies have a 34% marginal tax rate. If the merger takes place, Company X will assume P1,425,000 of Company Y's long-term liabilities. Company X's weighted average cost of capital is 9.25% and Company Y's weighted average cost of capital is 14.75%. The acquisition will be evaluated as a perpetuity. If Company X acquires Company Y for PI,125,000 in cash, then the estimated change in the combined wealth of Company X's shareholders will be nearest P433,729 increase. b. 10. a. P1,558,729 increase. P379,830 decrease. d. с. P2,207,838 increase. The following information refers to Questions No. 11 and 12: Ebony Corporation has negotiated the acquisition of Ivory Company in an exchange of shares. Under the terms of the merger, the exchange ratio will…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?
- 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 millionHastings Corporation is interested in acquiring Vandell Corporation. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.3 million, $2.9 million, $3.4 million, and $3.79 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 5% rate. Hastings plans to assume Vandell’s $10.29 million in debt (which has a 7.4% 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 Year 3, a target capital structure of 30% debt will be maintained. Interest at Year 4 will be $1.431 million, after which the interest and the tax shield will grow at 5%. Vandell currently has 1.5 million shares outstanding and a target capital structure consisting of 30% debt; its current beta is 1.10 (i.e., based on its target capital structure). Vandell and Hastings each have a…Wagirin.Ltd, a retail company, wants to acquire Sabeni.Ltd, a merchandise company. The value of the acquisition is SG$ 50,000,000 worth of Wagirin.Ltd stocks. The acquisition will bring incremental value as of SG$ 10,250,000. Sabeni.Ltd has 22,000 stocks outstanding with the price of SG$ 2,250 per share. Wagirin.Ltd has stocks outstanding as of 100.000 shares with the price of SG$ 11,000 per share. The negotiation has an actual price paid for the acquisition using company stock as of SG$ 53,500,000. Required: 1. The value of Sabeni.Ltd for Wagirin.Ltd 2. The net present value of the acquisition. 3. Explain should Wagirin.Ltd acquire Sabeni.Ltd. Give your reason