If Genie went ahead with the acquisition of Aladdin, what is the total value of the acquisition? (What is the maximum price per share that Genie should be willing to pay for this acquisition? 3)If Genie decided to go ahead with the cash acquisition, what will be its price per share after the acquisition? Case 3: Mergers & AcquisitionsGenie Inc. is a manufacturer of kitchen appliances. After having been in business for 56years, the firm is currently experiencing stable growth of 2 to 3% per year. Many industryexperts consider Genie Inc. as a mature company. Genie's current share price is $20, with2,500,000 shares outstanding; weighted cost of capital (WACC) is 15%. The company'smost recent financial statements are shown below:Statement of Comprehensive Income (in $000)SalesCost of goods soldOperating expensesEBDITDepreciationEBITInterest expenseTaxable incomeTaxes (40%)Net incomeStatement of Financial Position (in $000)CashInventoryAccounts receivableCurrent assetsNet fixed assetsTotal assets$10,0007,0001,0002,0002001,8001,342458183$275$ 8000 Accounts payable583Notes payable8339,417Long-term debtCurrent liabilities20,000Equity$29,417 Total liabilities & equity$1,0003,4174,41710,00015,000$29,417Genie has accumulated cash reserves of $8 million, and its CEO, Mr. Lionel Rich, believesthat it is a good time to think about boosting Genie's sales growth by acquiring anothercompany that is younger, with better growth opportunities. Mr. Rich has narrowed down thechoice to one potential target: Aladdin Corporation.Aladdin is a relatively young company; it has only been in business for five years. Its mainproducts are a line of extremely popular espresso machines. Its shares are selling at $7.50per share. It has 1,000,000 shares outstanding, and a WACC of 18%. Aladdin's financialstatements are shown below: Statement of Comprehensive Income (in $000)SalesCost of goods soldOperating expensesEBDITDepreciationEBITInterest expenseTaxable incomeTaxesNet incomeCashInventoryAccounts receivable 167Current assets475Most Recent Statement of Financial Position ($000)$200 Accounts payable108 Notes payableNet fixed assetsTotal assets$2,0001,300Current liabilities1605404050029720381$ 122Long-term debt9752000Equity5,0007,500$7,975 Total liabilities & equity $7,975$ 500475Mr. Rich estimates that the synergistic benefits from this acquisition will be $300,000 peryear for the foreseeable future. His analysis also indicates that Genie can acquire Aladdin bypaying $7.75 million in cash, or by swapping one Genie share for three Aladdin shares.Before Mr. Rich can take his recommendation to Genie's Board of Directors, he needsanswers to the following questions:

Value of acquisition means the price paid by an organization to acquire a new purchaser or for the…

If Genie went ahead with the acquisition of Aladdin, what is the total value of the acquisition? ( What is the maximum price per share that Genie should be willing to pay for this acquisition? 3)If Genie decided to go ahead with the cash acquisition, what will be its price per share after the acquisition?

If Genie went ahead with the acquisition of Aladdin, what is the total value of the acquisition? ( What is the maximum price per share that Genie should be willing to pay for this acquisition? 3)If Genie decided to go ahead with the cash acquisition, what will be its price per share after the acquisition?

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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