Consider firm X and Y.The firm had total earrings of $400,000 and shares outstanding of $95,000. Firm X per share market value is 4.5, Firm X per share book value is$4.5. Firm Y per share had total earnings of $300,000 and shares outstanding of $192,500. FirmY per share market value is $24.5 Firm Y per share book value is $312.875. a. Assume that firm X acquires FirmY by issuing long term debt to purchase all the shares outstanding at a merger premium of$6.875. Assuming that neither firms has any debt before merger, what would be the total assets for the new company XY? b.Assume that Firm Y acquires Firm X by issuing long term debt to purchase all the shares outstanding at a merger premium of $2.375. Assuming that neither firm has any debt before the merger, what would be the total assets for the new company YX round your answer to four decimal places after the point

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
icon
Related questions
Question

Consider firm X and Y.The firm had total earrings of $400,000 and shares outstanding of $95,000. Firm X per share market value is 4.5, Firm X per share book value is$4.5. Firm Y per share had total earnings of $300,000 and shares outstanding of $192,500. FirmY per share market value is $24.5 Firm Y per share book value is $312.875.

a. Assume that firm X acquires FirmY by issuing long term debt to purchase all the shares outstanding at a merger premium of$6.875. Assuming that neither firms has any debt before merger, what would be the total assets for the new company XY?


b.Assume that Firm Y acquires Firm X by issuing long term debt to purchase all the shares outstanding at a merger premium of $2.375. Assuming that neither firm has any debt before the merger, what would be the total assets for the new company YX

round your answer to four decimal places after the point

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Classification of Stocks
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education