Question
In: Accounting
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80 million shares outstanding. Company B has a market value of equity of $400 million and 25 million shares outstanding. Company A announces at the beginning of 2019 that is going to acquire Company B.
The projected pre-tax gains in operating income (in millions of $) from the merger are:
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Pre-tax Gains in Operating Income | 12 | 16 | 28 | 38 |
45 |
The projected pre-tax gains in operating income are expected to grow at 4% after year 2023. The company is using a discount rate of 8% to value the synergies. The marginal corporate tax rate is 35%.
Company A has decided to pay a $300 million premium for Company B. Assume that capital markets are efficient and that there is a 100% probability the deal will be closed.
By how much the price per share of Company A would change at the time of the announcement of the acquisition?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80
million shares outstanding. Company B has a market value of equity
of $400 million and 25 million shares outstanding. Company A
announces at the beginning of 2019 that is going to acquire Company
B.
The projected pre-tax gains in operating income (in millions of
$) from the merger are:
2019
2020
2021
2022
2023
Pre-tax Gains in Operating Income
12
16
28
38
45
The projected pre-tax...
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80
million shares outstanding. Company B has a market value of equity
of $400 million and 25 million shares outstanding. Company A
announces at the beginning of 2019 that is going to acquire Company
B.
The projected pre-tax gains in operating income (in millions of
$) from the merger are:
2019
2020
2021
2022
2023
Pre-tax Gains in Operating Income
12
16
28
38
45
The projected pre-tax...
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80
million shares outstanding. Company B has a market value of equity
of $400 million and 25 million shares outstanding. Company A
announces at the beginning of 2019 that is going to acquire Company
B.
The projected pre-tax gains in operating income (in millions of
$) from the merger are:
2019
2020
2021
2022
2023
Pre-tax Gains in Operating Income
12
16
28
38
45
The projected pre-tax...
A company has a market value of equity of $3,200,000 and one million shares outstanding. The...
A company has a market value of equity of $3,200,000 and one
million shares outstanding.
The company also has issued bonds with a face value of $2
million. The bonds have a coupon rate of 4% p.a. and coupons are
paid every six months. A coupon was just paid today. The bonds were
issued five years ago and have a maturity date in exactly nine
years’ time.
The company has a beta of 0.6, the current yield on the bonds...
YQR has a market value of $125 million and 5 million shares outstanding. HKG has a market...
YQR has a market value of $125 million and 5 million shares
outstanding. HKG has a market value of $40 million and 2
million shares outstanding. YQR thinks of taking over
HKG with a premium of $10 million. The combined firm will be worth
$185 million. If YQR offers 2 million shares of its
stock in exchange for the 2 million shares of HKG, what will the
stock price of YQR be after the acquisition? What
exchange ratio between the two stocks would make...
YQR has a market value of $125 million and 5 million shares outstanding. HKG has a...
YQR has a market value of $125 million and 5 million shares
outstanding. HKG has a market value of $40 million and 2 million
shares outstanding. YQR thinks of taking over HKG with a premium of
$10 million. The combined firm will be worth $185 million. If YQR
offers 1.2 million shares of its stock in exchange for the 2
million shares of HKG, what will the stock price of YQR be after
the acquisition? What exchange ratio between the...
Your company is an all-equity firm and has 1 million shares outstanding and its current market...
Your company is an all-equity firm and has 1 million shares
outstanding and its current market value is $10 million, with an
operating income (EBIT) is $1.5 million. This morning your company
issued $2 million of debt at a 10% coupon rate and used the
proceeds to repurchase your company’s shares from the stock market.
The transaction is completed before the end of the day. Your
company’s cost of capital is 6% and the corporate income tax rate
is 20%....
4. YQR has a market value of $125 million and 5 million shares outstanding. HKG has...
4. YQR has a market value of $125 million and 5 million shares
outstanding. HKG has a market value of $40 million and 2 million
shares outstanding. YQR thinks of taking over HKG with a premium of
$10 million. The combined firm will be worth $185 million. If YQR
offers 1.2 million shares of its stock in exchange for the 2
million shares of HKG, what will the stock price of YQR be after
the acquisition? What exchange ratio between...
Little Oil has outstanding one million shares with a total market value of $20 million. The...
Little Oil has outstanding one million shares with a total
market value of $20 million. The firm is expected to pay $1 million
of dividends next year, and thereafter the amount paid out is
expected to grow by 5% a year in perpetuity. Thus the expected
dividend is $1.05 million in year 2, $1.1025 million in year 3, and
so on. However, the company has heard that the value of a share
depends on the flow of dividends, and therefore...
Company Y market value of debt is $6 million. Company Y has 300 000 shares outstanding...
Company Y market value of debt is $6 million. Company Y has 300
000 shares outstanding and current share price is $22. The cost of
equity is 15%. Company tax rate 35%.
a)What is the market value of equity?
b) What is the debt to equity ratio?
c)If company’s weighted average cost of capital (WACC) is 10%,
what is the pretax cost of debt?
d) Company Y has an investment project, which cost $2 million
and offers cash flow $1,5...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella Co.,...
- Parallel Arrays This question is in MindTap Cengage Summary In this lab, you use what you...
- 5. You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella...
- JAVA Write a test program that prompts the user to enter a series of integers and...
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
ADVERTISEMENT