Company A acquires Company B for an Equity Purchase Price of $500, and it issues $250 of Common Stock and $250 of Debt to fund this deal. Company B’s Assets (all of which are “operational”) are worth $350, and it has no Liabilities. Of the purchase premium, $100 is allocated to Goodwill, and $50 is allocated to Other Intangible Assets.In the first year following the deal, Company A generates a total of $100 in Net Income, and it issues $50 in Common Dividends to its Common Shareholders and $50 in Preferred Dividends to its Preferred Stockholders.How do Company A’s Current Equity Value and Current Enterprise Value change from beginning to end?a. Current Equity Value is up by $250, and Current Enterprise Value is up by $500.b. Current Equity Value is up by $300, and Current Enterprise Value is up by $500.c. Current Equity Value is up by $500, and Current Enterprise Value is up by $350.d. Current Equity Value is up by $250, and Current Enterprise Value is up by $350.
Company A acquires Company B for an Equity Purchase Price of $500, and it issues $250 of
Common Stock and $250 of Debt to fund this deal. Company B’s Assets (all of which are
“operational”) are worth $350, and it has no Liabilities. Of the purchase premium, $100 is
allocated to
In the first year following the deal, Company A generates a total of $100 in Net Income, and
it issues $50 in Common Dividends to its Common Shareholders and $50 in Preferred
Dividends to its Preferred Stockholders.
How do Company A’s Current Equity Value and Current Enterprise Value change from
beginning to end?
a. Current Equity Value is up by $250, and Current Enterprise Value is up by $500.
b. Current Equity Value is up by $300, and Current Enterprise Value is up by $500.
c. Current Equity Value is up by $500, and Current Enterprise Value is up by $350.
d. Current Equity Value is up by $250, and Current Enterprise Value is up by $350.
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