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In: Finance
Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies...
Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies as separate entities are $52 million and $26 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $660,000 per year in perpetuity. Velcro Saddles is willing to pay $30 million cash for Skiers’. The opportunity cost of capital is 10%.
a. What is the gain from the merger? (Enter your answer in millions rounded to 2 decimal places.)
Gain from Merger?
What is the cost of the cash offer? (Enter your answer in millions.)
Cost of the cash offer?
c. What is the NPV of the acquisition under the cash offer? (Enter your answer in millions rounded to 2 decimal places.)
NPV?
Solutions
jeff jeffy answered 10 months agoRelated Solutions
Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies...
Velcro Saddles is contemplating the acquisition of Skiers’
Airbags Inc. The values of the two companies as separate entities
are $24 million and $12 million, respectively. Velcro Saddles
estimates that by combining the two companies, it will reduce
marketing and administrative costs by $520,000 per year in
perpetuity. Velcro Saddles can either pay $16 million cash for
Skiers’ or offer Skiers’ a 48% holding in Velcro Saddles. The
opportunity cost of capital is 10%.
Required:
What is the gain from...
live the answer in two decimal place Tigo Ltd is contemplating the acquisition of Airtel Ltd....
live the answer in two decimal place
Tigo Ltd is contemplating the acquisition of Airtel
Ltd. The present values of the two companies as separate entities
are GH¢30million and GH¢10million respectively. Tigo estimates that
by combining the two companies, it will reduce marketing and
administration costs by ¢700,000 per year in perpetuity. Tigo can
either pay ¢15million cash for AIrtel or offer Airtel shareholders
a 50% holding in Tigo. The opportunity cost of capital is 10%.
Use this question to...
Tax effects of acquisition Connors Shoe Company is contemplating the acquisition of Salinas Boots, a firm...
Tax effects of acquisition Connors Shoe Company is
contemplating the acquisition of Salinas Boots, a firm that has
shown large operating tax losses over the past few years. As a
result of the acquisition, Connors believes that the total pretax
profits of the merger will not change from their present level for
15 years. The tax loss carryforward of Salinas is $800,000, and
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Perform a search on "acquisition strategy." Identify at least two companies in different industries that are...
Perform a search on "acquisition strategy." Identify at least
two companies in different industries that are using acquisitions
to strengthen their market positions. How have these acquisitions
enhanced the acquiring companies' competitive capabilities?
Subject: Strategic Management
Please write more than 350words.
Daily Enterprises is contemplating the acquisition of some new equipment. The purchase price is $35,000. The...
Daily Enterprises is contemplating the acquisition of some new
equipment. The purchase price is $35,000. The equipment has a
4-year life. The company expects to sell the equipment at the end
of year 4 for $7,000. The firm uses MACRS depreciation which allows
for 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent
depreciation over years 1 to 4, respectively. The equipment can be
leased for $9,000 a year. The firm can borrow money at 9 percent
and has a...
An experiment involving perfect inelastic collision is conducted: two carts with velcro strips are placed on...
An experiment involving perfect inelastic
collision is conducted: two carts with velcro strips
are placed on a track attached to a motion sensor. One cart is
stationary and the other is pushed slightly towards the cart such
that it attaches to the cart that is stationary (via. velcro).
Given the following data of the experiment, what is the expected
final velocity of the moving object? Compare the expected final
velocity to the actual measured one, then determine what the
percentage...
There is an assignment of fair values related to a $3,765,000 acquisition. The fair value of...
There is an assignment of fair values related to a $3,765,000
acquisition. The fair value of the net identifiable tangible assets
is $1,850,000. The purchase included a Customer List with a fair
value at $337,000.
A) Assume that the purchase and sale agreement requires the
payment of an additional $850,000 if the subsidiary achieves a
certain level of earnings. The fair value of that contingent
earnings clause in the agreement is estimated to be $216,500. How
does this additional information...
VS is contemplating the acquisition of TG. Each company has 1 million shares outstanding You are given...
VS is contemplating the acquisition of TG. Each
company has 1 million shares outstanding
You are given the following information:
Value of VS alone (in million)
107
Value of TG alone (in million)
56
From merger, the estimated reduction in after-tax R&D costs
per year in perpetuity (in million)
3
VS is considering a cash offer to TG (in million):
72.8
Cost of capital
0.11
Tax-rate
0.3
What would be the gain from the merger?
Now suppose that instead of making...
Currently companies seek to improve their operations with the acquisition of equipment that reduces their costs....
Currently companies seek to improve their operations with the
acquisition of equipment that reduces their costs. One of the
companies that works with this scheme is GR Distribuidora. This
company is in the process of expanding and requires the purchase of
transportation vehicles for its warehouse areas that have organic
fertilizer products. As there has been an increase in demand, the
distribution of products is very important for customer
satisfaction. The plant in the city of Puebla is in an...
Q Corporation and R Inc. are two companies with very similar characteristics. The only difference between the two companies is that Q Corp.
Q Corporation and R Inc. are two companies with very similar characteristics. The only difference between the two companies is that Q Corp. is an unlevered firm, and R Inc. is a levered firm with debt of $5 million and cost of debt of 10%. Both companies have earnings before interest and taxes (EBIT) of $2 million and a marginal corporate tax rate of 40%. Q Corp. has a cost of capital of 15%. (20 marks total)
a. What...
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