Need help with the following questions please. One company that the analysis indicated as potentially suitable for acquisition by Admiral is Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West Coast chain with current annual sales of approximately $75 million. n 2003, the company went public. (The Favorite family now controls about 57 percent of the common stock.) 1. Calculate the pre-merger earnings per share for Admiral and Favorite and the pre-merger price-to-earnings (P/E) ratio for each company (based on the stated prices per share). 2. Calculate three additional exchange ratios of Admiral shares for each share of Favorite. Assume a 15%, 20%, and 25% premium price per share over the stated Favorite price of $15 per share.
Need help with the following questions please. One company that the analysis indicated as potentially suitable for acquisition by Admiral is Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West Coast chain with current annual sales of approximately $75 million. n 2003, the company went public. (The Favorite family now controls about 57 percent of the common stock.) 1. Calculate the pre-merger earnings per share for Admiral and Favorite and the pre-merger price-to-earnings (P/E) ratio for each company (based on the stated prices per share). 2. Calculate three additional exchange ratios of Admiral shares for each share of Favorite. Assume a 15%, 20%, and 25% premium price per share over the stated Favorite price of $15 per share.
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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Need help with the following questions please.
One company that the analysis indicated as potentially suitable for acquisition by Admiral is
Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West
Coast chain with current annual sales of approximately $75 million. n 2003, the company went public.
(The Favorite family now controls about 57 percent of the common stock.)
1. Calculate the pre-merger earnings per share for Admiral and Favorite and the pre-merger price-to-earnings (P/E) ratio for each company (based on the stated prices per share).
2. Calculate three additional exchange ratios of Admiral shares for each share of Favorite.
- Assume a 15%, 20%, and 25% premium price per share over the stated Favorite price of $15 per share.
3. Calculate the Admiral Foods post-merger income statement and earnings per share, assuming an exchange ratio of 0.45.
Transcribed Image Text:Admiral Foods Corporation Balance Sheet (in Millions of Dollars)
$225
Current liabilities
307
Long-term debt
Common equity (10,000,000 shares)
Total liabilities and equity
Current assets
Fixed assets, net
Total assets
$532
Admiral Foods Corporation Income Statement (in Millions of Dollars)
Sales
Less: Expenses, excluding depreciation
Less: Depreciation
Earnings before interest and taxes
Less: Interest
Earnings before taxes
Less: Taxes (40%)
Earnings after taxes
$101
106
325
$532
$1,261.0
1,118.2
36.0
$106.8
12.8
$94.0
37.6
$ 56.4
Transcribed Image Text:Favorite Food Systems, Inc. Balance Sheet (in Millions of Dollars)
Current liabilities
Long-term debt
Common equity
Current assets
Fixed assets, net
Total assets
$10.6
12.1
$22.7
Favorite Food Systems, Inc. Income Statement (in Millions of Dollars)
Sales
Less: Expenses, excluding depreciation
Less: Depreciation
Earnings after taxes
Earnings before interest and taxes
Less: Interest
Earnings before taxes
Less: Taxes (40%)
Dividends per share
Common stock (price per share)
(2,000,000 shares)
Total liabilities and equity
Additional Information
Admiral Foods
Corporation
$2.50
$50
$6.5
2.2
14.0
$22.7
$75.2
65.4
1.4
$ 8.4
0.4
$8.0
3.2
$ 4.8
Favorite Food
Systems
$ 0.60
$15
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