UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
expand_more
expand_more
format_list_bulleted
Question
Chapter 29, Problem 1QP
Summary Introduction
To calculate: The minimum projected value of the synergistic advantages from the merger.
Synergy:
Synergy is a state in which two or more companies combined then they can perform better than the sum of their individual efforts in terms of productivity and revenue.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Pearl, Incorporated, has offered $197 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $178 million as an independent operation. If the merger makes economic sense for Pearl, what is the minimum estimated value of the synergistic benefits from 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.Requiredi. 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 economicjustification for the merger?
Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial
data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in
this merger.
Sales (millions)
Net income (millions)
Koala
$90
$9.4
O a. $2.23
O b. $2.75
O c. $2.25
O d. $2.21
Laser
$10
$1.2
Common shares outstanding (millions) 4.0
0.8
Earnings per share
$2.35
$1.50
Common stock (price per share) $35.00
$27.00
Calculate the post-merger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange
Chapter 29 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 29 - Prob. 1CQCh. 29 - Prob. 2CQCh. 29 - Prob. 3CQCh. 29 - Prob. 4CQCh. 29 - Prob. 5CQCh. 29 - Prob. 6CQCh. 29 - Economies of Scale What does it mean to say that a...Ch. 29 - Prob. 8CQCh. 29 - Prob. 9CQCh. 29 - Prob. 10CQ
Ch. 29 - Prob. 1QPCh. 29 - Prob. 2QPCh. 29 - Prob. 3QPCh. 29 - Prob. 4QPCh. 29 - Cash versus Stock Payment Penn Corp. is analyzing...Ch. 29 - EPS, PE, and Mergers The shareholders of Flannery...Ch. 29 - Prob. 7QPCh. 29 - Cash versus Stock as Payment Consider the...Ch. 29 - Prob. 9QPCh. 29 - Prob. 10QPCh. 29 - Prob. 11QPCh. 29 - Prob. 12QPCh. 29 - Prob. 13QPCh. 29 - Prob. 14QPCh. 29 - Prob. 15QPCh. 29 - Prob. 16QPCh. 29 - Prob. 1MCCh. 29 - Prob. 2MCCh. 29 - Prob. 3MCCh. 29 - Prob. 4MC
Knowledge Booster
Similar questions
- Holmes, Inc., has offered $351,887 cash for all of the common stock in Watson Corporation. Based on recent market information, Watson is worth $216,796 as an independent operation. If the merger makes economic sense for Holmes, what is the minimum estimated value of the synergistic benefits from the merger?arrow_forwardPearl, Inc. has offered $790 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $670 million as an independent operation. If the merger makes economic sense for Pearl, what is the minimum estimated value of the synergistic benefits from the merger? Multiple Choice $126,000,000 $123,600,000 $-120,000,000arrow_forwardFirm A has a total market value of RM 200 million. It is planning to acquire Firm B, which has a total market value of RM 630 million. Firm A estimates that the merged firm will be worth RM 3050 million as a result of operating efficiencies. The financial accountants are advising that Firm A will have to pay a premium of RM 24 million in price to acquire Firm B. merger related costs and expenses are estimated at RM 42 million. Is there an advantage arising from merger, in particular to Firm A?arrow_forward
- ABC will be merging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18%. *How much is the value of synergy of the merger?arrow_forwardXterm 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) 4945arrow_forwardNewCo is trying to fully acquire OldCo in an all cash offer. NewCo will assume all the debt of OldCo as part of the acquisition. The expected synergies from the acquisition are $700 million. Before the transaction OldCo has 25 million shares outstanding, a share price of $65, and outstanding debt of $500 million (no excess cash). Is the following statement true or false? If NewCo offers $65 per share of OldCo and the acquisition is successful, the shareholders of NewCo will have captured the full value of the synergies of this transaction. Pick One: True Falsearrow_forward
- Dongle Corp. is analysing an acquisition of Tingle Inc. Dongle has 10 million shares outstanding, which sell for $40 each. Tingle has 5 million shares outstanding, which sell for $20 each. The merger gains are estimated at $25 million. If Dongle Corp. has a price-earnings ratio of 12 and Tingle has a P/E ratio of 8, what should be the P/E ratio of the merged firm? Assume in this case that the merger is financed by an issue of new Dongle Corp. shares. Tingle will get one Dongle share for every two Tingle shares held. (Do not round intermediate calculations. Round your answer to 2 decimal places.) P/E 18.14arrow_forwardMammoth 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 millionarrow_forwardABC will be merging with Target Corporation. Equity values were gathered as follows: ABC, separate equity value = P13,000,000; Target, separate equity value = P2,500,000. The merged entity, ACBT Inc., will have annual net earnings of P3,060,000 and a required return on equity of 18% 1.) How much is the intrinsic value of the merged entity?arrow_forward
- Prior to a potential merger Ross Co has 4500 shares outstanding at a market price per share of $31. Bulbs Inc has 2,800 shares outstanding at $18 per share. Assume Ross Co has estimated the valueof the synergistic benefits from acquiring Bulb Inc to be $3,500. Nowther firm has outstanding debt. The acquiring firm offered a price of $19.75 per share to the target. If the deal goes through, what is the merger premium? A) 4900 B) 3500 C) 2800 D) 6125 E) 0arrow_forwardTom Corporation is considering the acquisition of Jerry Corporation. Jerry Corporation has free cash flows to debt and equity holders of $3,750,000. If Tom Corporations acquires Jerry Corporation, Jerry will reduce operating costs by $1,500,000. This will increase free cash flow to $4,900,000. Assume that cash flows occur at year-end and the weighted average cost of capital is 9%. a. What is the value of Jerry Corporation without a merger? o. What is the value of Jerry Corporation with the merger?arrow_forwardConsider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover. Pre-merger Value A $550m Pre-merger Value B $420m Post-merger Value A + B $1,150m Cash Offer $580m Share Offer 52% of Shares in A + B Estimate the gains available from the merger. Estimate the value of the merger to firm A’s shareholders under both the cash and share offer. Estimate the value of the merger to firm B’s shareholders under both the cash and share offer. Which offer will predominate, cash or shares, if the shareholders of A are given the choice?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT