RSM333H1 Lecture Notes - Lecture 8: Capital Expenditure, Cash Flow, Financial Statement
Document Summary
Understanding and calculating the impact of a takeover on the financial statements of the acquiring firm (the combined entity) Acquiring firm assumes all assets, liabilities, equity of target firm. Add market value of acquired firm to book value of acquiring firm. Difference between price paid for acquisition and net assets purchased in acquisition. Net assets purchased based on fair market value. Common stock valued based on offer price for takeover. Represents additional cash flow due to buying the company. Target firm has market value of assets of ,000 and market value of liabilities of ,500; purchase price was ,000. Amount of goodwill recorded is ,000 - (,000 - ,500) = ,500. 00. Fcf to equity is cash flow available to shareholders. Is sum total of all the firm"s present and future projects. Liquidation value looks at value if all assets sold at realizable value and all liabilities repaid from asset realizations. Price is value at time deal is consummated.
