Parentis Ltd. has a value of $150million while the value of Sandis Ltd. is $70million. A merger between the two has just gone through and cost savings with a present value of $ 10million is expected to be achieved. Parentis Ltd. paid cash of $85million for the entire paid up capital of Company B. Required i. What is the value of the two firms after the merger? ii. Calculate the cost of the merger to the shareholders of Parentis Ltd. iii. What is the portion of the gain/loss due Parentis Ltd.’s shareholders? iv. From the perspective of the shareholders of Company A, is there an economic justification for the merger?
Parentis Ltd. has a value of $150million while the value of Sandis Ltd. is $70million. A merger between the two has just gone through and cost savings with a present value of $ 10million is expected to be achieved. Parentis Ltd. paid cash of $85million for the entire paid up capital of Company B. Required i. What is the value of the two firms after the merger? ii. Calculate the cost of the merger to the shareholders of Parentis Ltd. iii. What is the portion of the gain/loss due Parentis Ltd.’s shareholders? iv. From the perspective of the shareholders of Company A, is there an economic justification for the merger?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Parentis Ltd. has a value of $150million while the value of Sandis Ltd. is $70million. A merger between the two has just gone through and cost savings with a present value of $ 10million is expected to be achieved. Parentis Ltd. paid cash of $85million for the entire paid up capital of Company B.
Required
i. What is the value of the two firms after the merger?
ii. Calculate the cost of the merger to the shareholders of Parentis Ltd.
iii. What is the portion of the gain/loss due Parentis Ltd.’s shareholders?
iv. From the perspective of the shareholders of Company A, is there an economic
justification for the merger?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education