Merger Acquisition Question The Hypothetical Company Wants To Acquire Target Comapny 2814046

MERGER & ACQUISITION : QUESTION : The Hypothetical Company wants to acquire Target Comapny.The balance sheet of Target Company as at 31st December (Current year)has the following assets and liabilities. Document Preview:

MERGER & ACQUISITION : QUESTION : The Hypothetical Company wants to acquire Target Comapny.The balance sheet of Target Company as at 31st December (Current year)has the following assets and liabilities. LiabilitiesAmount($)AssetsAmount($) Equity Share Capital300000.00Cash10000.00 (3000 shares of $10each) Retained earnings100000.00Debtors15000.00 12% Debentures100000.00Inventories85000.00 Creditors & otherPlant & liabilities160000.00equipment550000.00 660000.00660000.00 Additional information : The shareholders of Target Company will get 1 share in Hypothetical Company for every 2 shares;the shares of the Hypothetical Company would be issued at its current market price of $15 per share.Debenture holders will get 13% convertible debentures in the purchasing firm of same amount.The external liabilities are expected to be settled at $ 150000.00 Further,it is estimated that debtors and inventories are expected to realise $90000.00 It is expected that the cash inflows after taxes from the new machine will be $150000.00 per year for the next 6 years of useful life of the machine,the expected salvage value of plant at the end of its useful life is $50000 The firm’s cost of capital is 12% Advise the company regarding the financial feasibility of the acqusition.

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