(b) of RM55 per shares. Jakel Development expects its shares to sell at the same price earnings or multiple increase after the merger as before merging. The following information for both firms: Jakel Development Berhad is considering to merge with Recron Malaysia Sdn Bhd at a cost Recron Earnings available for common share RM225,000 RM50,000 90,000 units 15,000 units RM50 Item Jakel Number of shares outstanding Market price per share RM40 Based on the above information: i. Calculate the share price of the merged firm. ii. Jakel Development Berhad is the largest textile company while Recron Malaysia is a cotton yarn manufacturer in Malaysia. If both companies are agreed to merge, identify the type of merger and explain how the merge can foster growth and long-term success for the firm.

(b) of RM55 per shares. Jakel Development expects its shares to sell at the same price earnings or multiple increase after the merger as before merging. The following information for both firms: Jakel Development Berhad is considering to merge with Recron Malaysia Sdn Bhd at a cost Recron Earnings available for common share RM225,000 RM50,000 90,000 units 15,000 units RM50 Item Jakel Number of shares outstanding Market price per share RM40 Based on the above information: i. Calculate the share price of the merged firm. ii. Jakel Development Berhad is the largest textile company while Recron Malaysia is a cotton yarn manufacturer in Malaysia. If both companies are agreed to merge, identify the type of merger and explain how the merge can foster growth and long-term success for the firm.

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

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Ace Co. is to be taken over by Beta Ltd. at the end of year 2007. Beta agrees to pay the share-holders of Ace the book value per share at the time of the takeover. A reliable analyst makes the following projections for Ace (assume cost of capital is 10% per annum): (S per share) |2002/2003[2004|2005(20062007| Dividends 151.00[51.00/51.00[51.00[51.00) perating cash 2.00[ 1.50] 1.00] 0.75[ 0.50] lows.......... (Capital —{ — 100 Loo| — lexpenditures.. [Debt increase .oojf0.50] 1.00| 1.25 0.50] (decrease).... INet income 145 1.10| 0.60] 0.25[(0.10)| Book value 9.00| 9.45 9.55 9.15 8.40| 7.30 Required: a. Estimate Ace Co’s value per share at the end of year 2002 using the dividend discount model. b. Estimate Ace Co’s value per share at the end of year 2002 using the residual income model.
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 7.2 14.4 Shares outstanding 73,000 146,000 Earnings $ 210,000 $ 630,000 Bread’s shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms?
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
Graham & Sons wishes to evaluate a proposed merger into the RCN Group. Graham had 2019 earnings of $300,000, has 100,000 shares of common stock outstanding, and expects earnings to grow at an annual rate of 7%. RCN had 2019 earnings of $900,000, has 200,000 shares of common stock outstanding, and expects its earnings to grow at 5% per year. a. Calculate the expected earnings per share (EPS) for Graham & Sons for each of the next 5 years (2020-2024) without the merger. b. What would Graham's stockholders earn in each of the next 5 years (2020-2024) on each of their Graham shares swapped for RCN shares at a ratio of 0.8 share of RCN for 1 share of Graham? a. The expected EPS for Graham & Sons for year 2020 without the merger is $ ? (Round to the nearest cent.) The expected EPS for Graham & Sons for year 2021 without the merger is $ ? (Round to the nearest cent.) The expected EPS for Graham & Sons for year 2022 without the…
Task 6. ANGEL Company plans to acquire a processing plant for P40 million. To finance the acquisition, the business will issue 6% preference shares with a par value of P100 per share. The selling price of the preference shares is P150. the business is subject to a 30% income tax rate, and has declared dividends to preference shares of P6 the previous year. Required: Compute the cost of preference share.
Firm A and Firm B are all-equity firms. Firm A has 10,000 shares outstanding at a market price of $25 a share. Firm B has 7,500 shares outstanding at a price of $10 a share. Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $14,500. What will the price per share be of the post-merger firm if payment is made in stock? O $27.30 O $25.53 O $26.32 O $25.00 $25.38
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
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
Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 1,800 shares of stock outstanding at a market price of $40 a share. Firm B has 1,200 shares outstanding at a price of $47 a share. What is the value per share of the merged firm?
Acquiring Corporation is considering a takeover of Takeover Target Incorporated. Acquiring has 16 million shares outstanding, which sell for $30 each. Takeover Target has 8 million shares outstanding, which sell for $23 each. If the merger gains are estimated at $40 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders? Highest price per share
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 16 23 Shares outstanding 96,000 230,000 Earnings $ 180,000 $ 900,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms? a-1. EPS a-2. PE b. Synergy value
The CEO of HIC Itd was in dilemma about the change of the capital structure through share repurchase The CEO proposed the following stragegy. HIC will use Rs. 3,50,0000 debt from its balancesheet (cash and marketable securities) and Rs. 1,00,000 new debt - bearing interest at the rate of 10% to repurchase 25000 shares at the price Rs. 18.00 per share Relevant information related to HIC Ltd Current Stock Price (Rs./per share) Cash and marketable securities (Rs. 12 400,000 Current Debt (Rs.) Equity (Rs.) 800,000 Number of share 100,000 EBIT (Rs.) 70,000 Other Income 10% of the cash and marketable securities Tax rate 30% a) How would such buyback affect the HIC? Consider impact on, among other things, Earning Per Share (EPS), Return on Equity (ROE), Debt ratio, Interest coverage ratio. b) Do you recommend buyback? Explain with reasons

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