Consider the following pre-merger information about firm X and firm Y:Firm XFirm Y$90,000$52,20046,80036,000Total earningsShares outstandingPer-share values:MarketBook$53$ 21$ 19SASA$ 9Assume that firm X acquires firm Y by paying cash for all the shares outstanding at amerger premium of $5 per share. Assuming that neither firm has any debt before or afterthe merger, construct the post-merger balance sheet for firm X assuming the use ofpurchase accounting methods.

This method is also known as the acquisition method. When one company acquires another, the…

Answered: Consider the following pre-merger…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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EPS and merger terms Expanding Corporation is interested in acquiring Target Company by swapping 0.4 share of its stock for each share of Target's stock. Certain financial data on these companies are given in the following table. Expanding Co. has sufficient authorized but unissued shares to carry out the proposed merger. Item Expanding Co. Target Co. Earnings Available for common stock $200,000 $50,000 Number of shares of common stock outstanding 50,000 20,000 Earnings per share (EPS) $4.00 $2.50 Market price per share $50 $15 Price/earnings (P/E) ratio 12.5 6 How many new shares of stock will Expanding have to issue to make the proposed merger? If the earnings for each firm remain unchanged, what will the post merger earnings per share be?
prior to a potential merger veggie co has $6,150 in total earnings with $1,800 shares outstanding at a market price per share of $41. Fruits ince has $3300 in total earnings with 1235 shares outstanding at $26 per share. assume veggie co acquires fruits inc via an exchange of stock at a price of $28 for each share of fruits inc stock. both veggie co and fruits inc have no debt outstanding. what will veggie co earning per share be after the merger? A. 3.58 B. 3.32 C. 2.67 D. 3.04 E. 3.95
Firm X has 100 shares outstanding at $20 per share. Firm Y also has 100 shares outstanding with a current price of $5 per share. Firm X offers Y's shareholders $8 per share in cash. Firm X's management expects the combined value of the firm to be $3,000. The expected gain and the NPV of the merger to X are, respectively, closest to: a) $500 and $300 b) $300 and $200 c) $500 and $200 d) $300 and $300
Firm B Firm A $ Firm AB Price Per Share Total Earnings (millions) Shares Outstanding (millions of shares) Total Value (millions) 75 $ 40 $ 300 $ 200 200 60 $ 15,000 $ 2,400 $ 20,000 Firm A has proposed to acquire Firm B at a price of $65 per share for Firm B's stock. a) What is the NPV of the merger to Firm A? What is the NPV of the merger to Firm B? b) What will be the post-merger price per share for Firm A's stock if Firm A pays in cash? c) To make the value of a stock offer equivalent to a cash offer of $3,900 million, how many shares should Firm A give to the owners of Firm B?
Consider the following information about Firm A and Firm T: Item Firm A (Aquiring Firm Firm T (Target Firm Price/share $20 $15 Outstanidng shares 50 25 Total market value $1,000.00 $375 Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium? Select one: a. $135.00 b. $125.00 c. $175.00 d. $150.00
Chapter 2. 1. On 12/31, Choco acquired all assets and liabilities of Cake by issuing 40,000 shares of its common stock when the market value (=fair value) is $32/share and this combination is a statutory merger (Cake was dissolved). Choco has common stock with $15 par, 50,000 shares outstanding and Cake has $5 par, 60,000 shares outstanding Choco Book Values Cake Book Values Cake Fair Values Cash and Receivable 350,000 180,000 170,000 Inventories 250,000 100,000 150,000 Land 700,000 120,000 240,000 Building and equipment 600,000 600,000 900,000 Patented technology 100,000 0 60,000 Accounts payable 300,000 120,000 150,000 Long-term debt 0 400,000 350,000 Common stock 750,000 300,000 Additional paid in capital 500,000 60,000 Retained earnings 12/31 450,000 120,000 Revenues 350,000 160,000 Expenses 310,000…
Consider the following information about Firm A and Firm T: Item Firm A (Acquiring firm) Firm T (Target firm) Price per share $20 $15 Outstanding shares 50 25 Total market value $1000.00 $375 Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium? Select one: a. $150.00 b. $135.00 c. $125.00 d. $175.00
4. The following table shows pre-merger data for ABC Company and XYZ, Inc. ABC XYZ No of share outstanding 2,000,000 5,000,000 EPS $2.50 $4.00 Price per share $15.00 $60 a) Assume XYZ is taking over ABC by issuing one of its shares for four shares of ABC. If there is no synergy, what would be the post-merger share price of XYZ? What would be the NPV of the merger? b) Assume there is synergy value of $4,200,000 created from the merger. What would be the post-merger price per share of XYZ? What would be the NPV of the merger? 5. Lazos Company is in distress mainly due to its failure to adopt the current technology. Creditors took Lazos to bankruptcy court and Lazos is fighting for a reorganization. The following is its condensed balance sheet. Book Value Market Value Current assets $ 120,000.00 $ 100,000.00 Machinery 200,000.00 150,000.00 Other fixed…
1. Company S and Company T combine to form a new Company ST by pooling all their assets and liabilities and issuing new ST shares to all shareholders in proportion to their previous shareholdings. How this transaction should be categorised? a) Merger b) Acquisition c) Spin-off d) De-merger
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Ee 111.
(please correct answer and) Question 26 Firm A and Firm B are both all - equity firms. Firm A has 2,200 shares outstanding at a market price of $16 per share. Firm B has 4,020 shares outstanding at a market price of $18 per share. Firm B is acquiring Firm A for $30,000 in cash. The incremental value of the acquisition is $3,400. What is the net present value of the acquisition? $840-$990-$1,020 $ 8,600 $9,050

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