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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Marigold Corporation purchased 630 common shares of Ditch Inc. for $12,900 on February 21. Marigold paid a 1% commission on the share purchase and, because the shares were not publicly traded, decided to account for them following the cost model. On June 30, Ditch declared and paid a cash dividend of $1.90 per share. (a) Prepare Marigold Corporation's journal entry to record the purchase of the investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date Account Titles and Explanation Feb. 21 Debit Credit
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…
Tanner-UNF Corporation acquired as a long-term investment $360 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $330 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $340 million. Required:1. How would this investment be classified on Tanner-UNF's balance sheet?2. to 4. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2021, interest on December 31, 2021, at the effective (market) and fair value changes as of December 31, 2021.5. At what amount will Tanner-UNF report its investment in the December 31, 2021,…
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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