Croatia Inc. is in the process of acquiring Vistara Inc. on a share exchange basis. The information related to the two companies is provided below. Croatia Inc. $14,000,000 1,500,000 Vistara Inc. $6,000,000 1,600,000 $5 10 Profit after tax Shares outstanding Earnings per Share PE Ratio As an analyst of Croatia Inc., you are required to calculate the following: Pre-Merger Market Value per Share of both companies. The maximum share exchange ratio Croatia Inc. can offer without the dilution of: EPS and $8 15 Market Value per Share Note: Do not round off any intermediate calculations. Only the rations shall be rounded off up to four decimals. (1) Pre-Merger MV: Croatia Inc.= $50. Vistara Inc. = $120.(1) (1) 0.6250 (2) 0.4167 (1) Pre-Merger MV: Croatia Inc.= $120. Vistara Inc = $50 (1) (1) 0.6200 (2) 0.4221 (1) Pre-Merger MV: Croatle Inc. $120, Vistara Inc. = $50 (1) (1) 0.6250 (2) 04167 (1) Pre-Merger MV: Croatia Inc.= $110, Vistara Inc. = $120.() (1) 0.6200 (2) 04221

Croatia Inc. is in the process of acquiring Vistara Inc. on a share exchange basis. The information related to the two companies is provided below. Croatia Inc. $14,000,000 1,500,000 Vistara Inc. $6,000,000 1,600,000 $5 10 Profit after tax Shares outstanding Earnings per Share PE Ratio As an analyst of Croatia Inc., you are required to calculate the following: Pre-Merger Market Value per Share of both companies. The maximum share exchange ratio Croatia Inc. can offer without the dilution of: EPS and $8 15 Market Value per Share Note: Do not round off any intermediate calculations. Only the rations shall be rounded off up to four decimals. (1) Pre-Merger MV: Croatia Inc.= $50. Vistara Inc. = $120.(1) (1) 0.6250 (2) 0.4167 (1) Pre-Merger MV: Croatia Inc.= $120. Vistara Inc = $50 (1) (1) 0.6200 (2) 0.4221 (1) Pre-Merger MV: Croatle Inc. $120, Vistara Inc. = $50 (1) (1) 0.6250 (2) 04167 (1) Pre-Merger MV: Croatia Inc.= $110, Vistara Inc. = $120.() (1) 0.6200 (2) 04221

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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Finance Loki Inc. and Thor Inc. have entered into a stock swap merger agreement whereby Loki will pay a 35% premium over Thor’s pre-merger price. A. If Thor’s pre-merger price per share was $37 and Loki’s was $52, what exchange ratio will Loki need to offer? B. On the day of the merger announcement, the increase in Thor (the target firm’s) stock price will be ______(higher/lower) than 35% (the takeover premium). C. Based on your answer in part B of this question, explain why you think Thor’s stock price increase will be higher or lower than the takeover premium at the time of the merger announcement.
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…
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 NPV of the acquisition to firm A? Select one: a. $1075.00 b. $575.00 c. $425.00 d. $555.00
Mammoth Inc. is acquiring Snail Ltd. Mammoth's share price is $50 and Snail's share price is $10. Both firms have 1 million shares outstanding. Mammoth expects a discounted synergistic value of $5 million from the merging of operations of the two firms. If Mammoth pays cash of $11.5 million to Snail's shareholders, what is the value of the merged firm? $68.5 million $65.0 million $60.0 million $63.5 million
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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
Xterm R US has offered $178,500 cash for all of the common stock of Outdoor Co. Based on recent market information Outdoor Co is worth $174,200 as an independent operation. If the merger makes economic sense for Xterm R US, what is the minimum estimated value of the synergistic benefits from the merger? A)4300 B) 4730 C) 5160 D) 4000 E) 4945
In a split - off transaction, if the subsidiary's book value is $150 million, and the parent company decides to distribute 80% of the subsidiary's book value to the shareholders of the new entity, how much will a shareholder holding 100 shares in the new entity receive in cash? Assume that the company has 1.25 million shares outstanding.
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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