Consider the following premerger information about Firm X and Firm Y:Firm XFirm Y$79,000$14,00036,000 11,000Total earningsSharesoutstandingPer-share values:MarketBook$$Assets from XAssets from YGoodwillTotal Assets XY51 $11 $166Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at amerger premium of $8 per share, and that neither firm has any debt before or after themerger. Construct the postmerger balance sheet for Firm X assuming the use of thepurchase accounting method. (Do not round intermediate calculations and round youranswers to the nearest whole number, e.g., 32.)

Mergers refer to when two existing companies merge into one new company. The companies merge because…

Answered: Consider the following premerger…

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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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…
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…
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Loki, Inc. and Thor, Inc. have entered into a stock-swap merger agreement whereby Loki will pay a 38% premium over Thor's pre-merger price. If Thor's pre-merger price per share was $40 and Loki's was $52, what exchange ratio will Loki need to offer? The ratio should be shares of Loki for every share of Thor. (Round to two decimal places.) C
34. Firm B's one million shares of stock currently sell for $20 each. Firm A estimates the economic gain from the merger to be $10 million and is prepared to offer $22 cash for each share of B. What percentage of the merger gain will be captured by firm B's shareholders?A. 20.00%B. 33.33%C. 50.00%D. 60.00%
Linpro Industries is considering the acquisition of Odetics Inc. in a stock-for-stock exchange. Assume no immediate synergistic benefits are expected. Selected financial data on the two companies are shown below: Linpro Odetics Sales (millions) $480 $90 Net income (millions) $38 $10.4 Common shares outstanding (millions) 10 2.1 Earnings per share $3.80 $4.95 Common stock (price per share) $45.60 $74.25 Calculate Linpro's post-merger EPS if the Odetics shareholders accept an offer of $90 a share in a stock-for-stock exchange. Question 9Answer a. $4.38 b. $3.81 c. $4.29 d. $3.42
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Apex Corporation is considering the purchase of Pinnacle Company in a stock-for-stock exchange. Selected data on the two companies are shown in the following table: Apex Pinnacle $845 $120 40 36 Sales (millions) Earnings after taxes (millions) Common shares outstanding (millions) Share price Earnings per share Dividends per share. P/E ratio Dividend payout ratio Assume that there are no synergistic benefits as the result of the merger. Determine EPS for the combined company if Apex offers a (Round your answers to three decimal places): a. 10 percent premium for Pinnacle $ b. 20 percent premium for Pinnacle $ c. 30 percent premium for Pinnacle $2,190 $ 280 70 72 $ $ $ 4.00 2.00 18 50% $ $ 3.00 1.20 12 40%
(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
Ex. 3 Company A is considering acquiring company B. Calculate the combined PV of Companies A and B, the goodwill and the net gain for the shareholders of company A and shareholders of Company B, considering the following financial information: Present value of Company A Present value of Company B Cost saving from merger of A and B Price A pay for B (EUR) 30 75 22 80 mn mn mn mn The present value of company B increase by EUR 7 mn on the back of rumors about the potential merger. Calculate the adjusted goodwill and adjusted gain for the shareholders of company A and shareholders of Company B after the rumors.
EPS and postmerger price Data for Henry Company and Mayer Services are given in the following table. Henry Company is considering merging with Mayer by swap-ping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. Item Henry company Mayer Services Earnings available for common stock. $225,000 $50,000 Number of shares of common stock outstanding. $90,000 $15,000 Market price per share . $45 $50 a. Calculate the ratio of exchange in market price?

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