Question 24 Firm A has 1,200 shares outstanding at a market price of $30 per share. Firm B has4,000 shares outstanding at a market price of $35 per share. Neither firm has any debt. Firm B isacquiring Firm A. The incremental value of the acquisition is $2,200. What is the value of Firm A toFirm B? $24,082 $38, 200 $41, 024 $43,800 $52,600

Mergers and acquisitions are done to achieve cost-effectiveness, economies of scale, more pricing…

Answered: Question 24 Firm A has 1,200 shares…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 92.2C

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(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
Problem 10. Firm B is going to acquire Firm T. The acquisition will be done via a share exchange. Firm B will exchange two of its shares for every one of Firm T's shares. Synergy is $260,000 Shares Outstanding Price per Share Earnings Firm B (Bidder) c) $172,500 d) $87,500 e) $260,000 80,000 $15 100,000 What is the takeover premium that has been paid to Firm T? a) $215,000 b) zero Firm T (Target) 24,000 $25 60,000
Firm B Firm A $ Firm AB Price Per Share Total Earnings (millions) Shares Outstanding (millions of shares) Total Value (millions) 75 $ 40 $ 300 $ 200 200 60 $ 15,000 $ 2,400 $ 20,000 Firm A has proposed to acquire Firm B at a price of $65 per share for Firm B's stock. a) What is the NPV of the merger to Firm A? What is the NPV of the merger to Firm B? b) What will be the post-merger price per share for Firm A's stock if Firm A pays in cash? c) To make the value of a stock offer equivalent to a cash offer of $3,900 million, how many shares should Firm A give to the owners of Firm B?
EXERCISE 12 METRO is going to merge with MEDEC, with METRO as the surviving firm. It is agreed that the exchange ratio is 1:2 Metro (RM *000) Medec(RM 000) Assets Current assets 50 70 Fixed assets 650 700 180 250 Liabilities and Equities Current liabilities Long term debt Common stock (RM1 par) Capital surplus Retained earnings 30 10 140 60 400 80 50 80 30 250 700 Earnings available to common stockholders Common Dividends 100 130 100 50 Addition to Retained Earnings 50 30 SITI RAHAYU BELI/FPP/UITM SABAH Page 25 Prepare a post merger financial position for METRO using the pooling of interest method.
PROBLEM 31 Çobarrubias Corporation had the following investment at FVTPL at the beginning of the current year: Fair Value ABC Corporation, 10,000 shares (originally cost P1,000,000) JKL Company, 20,000 shares (originally cost P500,000) -P1,200,000 450,000 During the current year, the following transactions occurred: Feb. 28 ABC Corporation declared a 3-for-2 share split. Apr 31 JKL Company declared a 20% share dividend. The market value of JKL Company on this date is P3.00. June 30 Sold 5,000 shares of JKL Company for P100,000, less brokers fee of P1,000. July 31 Sold 5,000 shares of ABC Corporation for P135. Sept 30 Received share rights to purchase one share of ABC Corporation for P100 per share. The companyshould tender five rights for everyshare acquired. The market price of ABC Corporation shares on this date is P140. Oct. 31 Exercise all the share rights from ABC Corporation. Dec. 31 The market value of the portfolio: ABC Corporation - P155 per share JKL Company- P36 per share…
Question 2Firm U is an all equity firm and has a market value of $100,000 and EBIT of $300,000. Firm L has identical EBIT but it uses 40% debt in its capital structure. Firm L pays total annual interest of $3000 on its debt. Both firms satisfy the MM assumptions. Taxes are absent.a) Ryan is the holder of $9,000 worth of L’s stock. What rate of return can he expect, assuming a dividend pay-out of 100%?b) Using homemade leverage, show how Ryan could generate exactly the same cash flows and rate of return by investing in Firm U.
PROBLEM 31Cobarrubias Corporation had the following investment at FVTPL at the beginning of the current year: Fair ValueABC Corporation, 10,000 shares (originally cost P1,000,000) - P1,200,000JKL Company, 20,000 shares (originally cost P500,000) - 450,000 During the current year, the following transactions occurred: Feb. 28 ABC Corporation declared a 3-for-2 share split. Apr 31 JKL Company declared a 20% share dividend. The market value of JKL Company on this date is P3.00. June 30 Sold 5,000 shares of JKL Company for P100,000, less brokers fee of P1,000. July 31 Sold 5,000 shares of ABC Corporation for P135. Sept 30 Received share rights to purchase one share of ABC Corporation for P100 per share. The company should tender five rights for every share acquired. The market price of ABC Corporation shares on this date is P140. Oct. 31 Exercise all the share rights from ABC…
d. 225,000 percent of the on for P516,000 b. 500,000 quity shares of Ritz Co. Art for the has a
Acquirer Target Newco Net Income 3500 1050 4495 No. of shares 2500 1100 4075 3600 EPS 1.4 0.95 Stock Price 31 36.5 PE 22.1 38.2 Ratio Ratio of Earnings to buyer 30.00% Dollar Value of Bid 44.3 Premium over target 21% Ratio of PE Paid to PE of Buyer 2.1 Answer 2 questions: 1. Is the deal accretive or dilutive? 2. How much in dollar terms, and percentage, is the deal accretive or dilutive?
QUESTION 4 The directors of Pep Limited have appointed you as a merger and acquisition specialist. They are considering the acquisition of Guardiola Limited. You are to advise them whether or not to proceed with the project. The following information is available: - Pep Limited Guardiola Limited Market price per share R5.00 R4.00 Earnings per share R2.2 R1.8 No. of shares issued 3 000 000 2 000 000 - Cash payment of R7 million to Guardiola Limited - Synergy benefits of R3 million will accrue to the acquisition Required: Assume the acquisition is based on market values with a cash payment. 4.1 Calculate the combined value of the proposed acquisition. 4.2 Calculate the net present value of the proposal. 4.3 Calculate the acquisition premium. 4.4 Calculate the post-acquisition market price of the share. 4.5 Calculate the post-acquisition increase/decrease price of the share. 4.6 Identify and explain SIX (6) advantages associated with a Merger and Acquisition.
Question 14 Last year Ryland acquired a 15% investment in Susan for GHS10,000 and that remains carried at cost in Ryland accounts. This investment now has a fair value of GHS30,000. Ryland has just made a further acquisition of 40% of the shares in Susan for GHS100,000. The net assets of Susan have now been determined at GHS60,000 and the fair value of the NCI at GHS80,000. Ryland has a policy of valuing the NCI at fair value at the date of acquisition. Required: Calculate the goodwill arising on the acquisition of Susan. Question 15 Truran, the parent, owns 80% of a subsidiary and the NCI in the subsidiary is currently measured at GHS100,000. Truran, the parent has just acquired all the remaining shares paying GHS90,000. Truran, the parent has acquired 5% of the shares reducing the NCI to 15% paying GHS80,000. Required: Calculate the difference arising that will be taken to equity in both situations.
QUESTION 11 In respect to the investment in 60% of the share capital in DAC Enviro Ltd (DAC): JJ Victory purchased 1.2 million (of DAC's 2.0 million issued share capital.) on 1 April 2021 In addition to the £45.0 million cash paid on the acquisition date, JJ Victory issued a one for eight share exchange. The market value of Victory shares on 1 April 2021 was £72.21 per share. The market value of JJ Victory shares on 30 September 2021 was £76.12. You confirm future payments of £20 million are payable in 2 years after acquisition (1 April 2023). JJ Victory applies discount rate of 7% on future payments and pro-rates finance costs charged in the period. Question: The total of the balance included in liabilities recognised in the statement of financial position at 30 September 2021 in respect to the investment in DAC Enviro Ltd is: O a. £17.47 million b. £106.65 million O c. £18.08 million O d. £18.69 million O e. £20.00 million

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