Question
In: Accounting
As financial manager of Corton Inc., you are investigating a possible acquisition of Denham. You have...
As financial manager of Corton Inc., you are investigating a possible acquisition of Denham. You have the basic data given in the following table.
| Corton | Denham | |||||||
| Forecast earnings per share | $ | 6.80 | $ | 1.80 | ||||
| Forecast dividend per share | $ | 4.08 | $ | .96 | ||||
| Number of shares | 1,900,000 | 1,500,000 | ||||||
| Stock price | $ | 90 | $ | 20 | ||||
You estimate that investors expect a steady growth of about 6% in Denham’s earnings and dividends. Under new management, this growth rate would be increased to 8.80% per year without the need for additional capital.
- What is the gain from the acquisition?
- What is the cost of the acquisition if Corton pays $25 in cash for each share of Denham?
- What is the cost of the acquisition if Corton offers one share of Corton for every three shares of Denham?
- How would the cost of the cash offer change if the expected growth rate of Corton was not changed by the merger?
- How would the cost of the share offer change if the expected growth rate was not changed by the merger?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
As financial manager of Corton Inc., you are investigating a possible acquisition of Denham. You have...
As financial manager of Corton Inc., you are investigating a
possible acquisition of Denham. You have the basic data given in
the following table.
Corton
Denham
Forecast earnings per share
$
7.80
$
1.30
Forecast dividend per share
$
4.68
$
.69
Number of shares
2,400,000
2,000,000
Stock price
$
90
$
20
You estimate that investors expect a steady growth of about 6%
in Denham’s earnings and dividends. Under new management, this
growth rate would be increased to 7.47%...
As treasurer of Firm A., you are investigating the possible acquisition of Firm B. You have the following data:
As treasurer of Firm A., you are investigating the possible acquisition of Firm B. You have the following data:
You estimate that investors currently expect a steady growth of about 6% in Firm B’ earnings and dividends. Under new management this growth rate would be increased to 8% per year, without any additional capital investment required.
Assume that the cost of equity remains unchanged and the Firm A's equity value also remains unchanged.
Firm A
Firm B
Earnings...
Barrison is investigating the possible acquisition of Soulmaster. The two firms have the following basic data:...
Barrison is investigating the possible acquisition of
Soulmaster. The two firms have the following basic data:
Barrison
Soulmaster
Number
of
shares
3,000,000
1,200,000
Current
stock
price
$75.00
$25.00
The combined firm will result in a
synergy gains of $15m.
a. What is the
value of of the combined firm?
b. What is the NPV
of acquisition if Barrison pays $30 in cash for each share of
Soulmaster?
c. What is the NPV
of the acquisition if...
You have been asked to value GGP, Inc as a possible acquisition target. The firm is...
You have been asked to value GGP, Inc as a possible acquisition
target. The firm is currently using 30% debt, has a levered beta of
2.2, and is subject to 21 percent corporate tax rate. The risk-free
rate is 4 percent and the market risk premium is 8 percent. You
expect that after 3 years (if still operating independently), the
growth of the firm will be declining by 3.5 percent a year
indefinitely. This also applies to the firm’s interest...
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI)....
Amy and Brian were
investigating the acquisition of a tax accounting business, Bottom
Line Inc. (BLI). As part of their discussions with the sole
shareholder of the corporation, Ernesto Young, they examined the
company's tax accounting balance sheet. The relevant information is
summarized as follows:
FMV
Adjusted Basis
Appreciation
Cash
$
10,000
$
10,000
Receivables
15,000
15,000
Building
100,000
50,000
50,000
Land
225,000
75,000
150,000
Total
$
350,000
$
150,000
$
200,000
Payables
$
18,000
$
18,000
Mortgage*
112,000
112,000...
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom line Inc. (BLI)....
Amy and Brian were investigating the acquisition of a tax
accounting business, Bottom line Inc. (BLI). As part of their
discussions with the sole shareholder of the corporation, Ernesto
Young, they examined the company's tax accounting balance sheet.
the relevant information is summarized as follows:
FMV Adjusted Basis Appreciation
Cash $10,000 $10,000
Receivable 15,000 15,000 50,000
Building 100,000 50,000 100,000
Land 225,000 75,000 150,000
Total $350,000 $150,000 $200,000
Payables $18,000 $18,000
Mortgage 112,000 112,000
Total $130,000 $130,000
The...
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI)....
Amy and Brian were investigating the acquisition of a tax
accounting business, Bottom Line Inc. (BLI). As part of their
discussions with the sole shareholder of the corporation, Ernesto
Young, they examined the company's tax accounting balance sheet.
The relevant information is summarized as follows:
FMV
Adjusted Basis
Appreciation
Cash
$
26,000
$
26,000
Receivables
20,700
20,700
Building
108,500
54,250
54,250
Land
281,250
93,750
187,500
Total
$
436,450
$
194,700
$
241,750
Payables
$
24,600
$
24,600
Mortgage*
138,750
138,750...
If you learn, this year, that a committee in Congress is investigating possible wrongdoing by Joe...
If you learn, this year, that a committee in Congress is
investigating possible wrongdoing by Joe Biden in Ukraine, and if
you are not told which chamber of Congress this is happening in,
which chamber would you guess it probably is? Explain
why.
In this question, you are investigating a private sector case that involves a possible termination of...
In this question, you are investigating a private sector case
that involves a possible termination of an employee of a large
commercial organisation. You have been given access to the employee
computer on which some inappropriate files were discovered. The
employee swears that he has never accessed these files. How would
you proceed to investigate this case by analysing the computer
employee has used, who has access to the computer and what other
possible relevant directions that you consider?
You are the financial manager of Craig Pediatrics Center and you have a meeting with the...
You are the financial
manager of Craig Pediatrics Center and you have a meeting with the
Board of Directors in a month. You need to create a financial
analysis of the organization. You have been asked to create a
financial analysis of the organization. You have been asked to
compare Craig Pediatrics to other pediatric healthcare
organizations in the area to create a trend
comparison.
Copy the questions
below onto your assignment and provide your responses to the
following four...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- With VMI, members of the supply chain share planning, demand, forecasting, and inventory information.
- Large lots are desirable in supply chain coordination despite increasing holding costs.
- ***Convert the C++ to Python*** #include <iostream> using std::cout; using std::cin; using std::endl; int charClass; char...
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
ADVERTISEMENT