Company A has agreed to buy Company B for $48.00/share in stock. Company A andCompany B's stock prices on the day before announcement were $112.00 and $42.00respectively. Company B has 20 million shares outstanding, 12 million exercisable optionsoutstanding with an average exercise price of $28.00 per share, $120 million in net debt tobe assumed by Company A and minority interests of $25 million to be acquired for cash.O 17.3215.75O 19.65Company B Income Statement ItemsCalculate the equity to net income multiple.20.00LTM RevenueLTM EBITDALTM Net Income$1000 million95 million60 million

Equity value = 48*20 = 96 millionAs exercised price is below 48, option must be exercised which will…

Answered: Company A has agreed to buy Company B…

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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On January 4, 2024, Runyan Bakery paid $334 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery's operations. Runyan received dividends of $4.00 per share on December 15, 2024, and Lavery reported net income of $200 million for the year ended December 31, 2024. The market value of Lavery's common stock at December 31, 2024, was $31 per share. On the purchase date, the book value of Lavery's identifiable net assets was $850 million and: The fair value of Lavery's depreciable assets, with an average remaining useful life of nine years, exceeded their book value by $ 90 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: Prepare all appropriate journal entries related to the investment during 2024, assuming Runyan accounts for this…
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On January 4, 2021, Runyan Bakery paid $334 million for 10 million shares of Lavery Labeling company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery’s operations. Runyan received dividends of $4.00 per share on December 15, 2021, and Lavery reported net income of $200 million for the year ended December 31, 2021. The market value of Lavery’s common stock at December 31, 2021, was $31 per share. On the purchase date, the book value of Lavery’s identifiable net assets was $850 million and: a The fair value of Lavery’s depreciable assets, with an average remaining useful life of nine years, exceeded their book value by $90 million. b The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: 1.Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts…
Excellence Auto Inc. (EAI) has 150,000 shares issued in total. Assume that on January 1, 2021, Power One Corporation acquired 15% of EAI's shares for $45 per share. Power One is assumed not to have significant influence over EAI and will use the cost method to account for its investments. For the year ended December 31, 2021, EAI reported profit of $800,000 and declared and paid $80,000 cash dividends. At December 31, 2021, EAI's common shares were traded at $50 each. How much is Power One required to record in its dividend revenue account in EAI? $132,000 $120,000 $12,000 $80,000
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On January 4, 2021, Runyan Bakery paid $360 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery's operations. Runyan received dividends of $4.50 per share on December 15, 2021, and Lavery reported net income of $330 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $32 per share. On the purchase date, the book value of Lavery's identifiable net assets was $980 million and: The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $80 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required:1.compute all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for…
The following are two independent situations.Situation 1Novak Cosmetics acquired 10% of the 215,000 shares of common stock of Martinez Fashion at a total cost of $12 per share on March 18, 2020. On June 30, Martinez declared and paid $74,400 cash dividend to all stockholders. On December 31, Martinez reported net income of $133,600 for the year. At December 31, the market price of Martinez Fashion was $13 per share.Situation 2Splish, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 28,500 outstanding shares of common stock at a total cost of $9 per share on January 1, 2020. On June 15, Seles declared and paid cash dividends of $35,400 to all stockholders. On December 31, Seles reported a net income of $91,800 for the year.Prepare all necessary journal entries in 2020 for both situations. (

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