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MGFB10H3 Lecture Notes - Lecture 3: W&W, Tax Rate, Xdi

232 views5 pages
greygoat862
21 Sep 2017
School
UTSC
Department
Finance
Course
MGFB10H3
Professor
Syed Ahmed

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Document Summary

Review problems with solutions on mergers & acquisitions. Andrea chubb & neil garcia limited (acngl) is considering acquiring updeshz chahl & anthony lam. The following information is available about the two companies: The most recent dividend paid by ucali was per share and it is expected that dividends and earnings at. Alex szeto & kuraish zoeb pools (akp) and alan luc & virginia chan pools (avp) have agreed to merge and form marina mironenko & debbie ma pools limited (mdl). The companies are exactly alike except for location. Akp is located in toronto, and avp is in edmonton. The end of period value of each firm is determined by the weather, as shown. Each company has an outstanding debt claim of ,000,000. Rainy would have been if the firms remain separate. Chun kit lam & nadeem hemani technologies (cnt) is considering the acquisition of xiaolin liu & danish. Cnt has estimated the following incremental benefits and investments:

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Related Questions

Plant, Inc., is considering making an offer to purchase Palmer Corp. Plant’s vice president of finance has collected the following information: Plant Palmer Price–earnings ratio 15.9 11.5 Shares outstanding 1,640,000 890,000 Earnings $ 4,477,200 $ 1,085,800 Dividends $ 1,064,000 $ 484,000 Plant also knows that securities analysts expect the earnings and dividends of Palmer to grow at a constant rate of 6 percent each year. Plant management believes that the acquisition of Palmer will provide the firm with some economies of scale that will increase this growth rate to 8 percent per year. a. What is the value of Palmer to Plant? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of Palmer $ b. What would Plant’s gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Gain $ c. If Plant were to offer $26 in cash for each share of Palmer, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ d. What is the most Plant should be willing to pay in cash per share for the stock of Palmer? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum bid price $ e. If Plant were to offer 239,000 of its shares in exchange for the outstanding stock of Palmer, what would the NPV be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ Plant's outside financial consultants think that the 8 percent growth rate is too optimistic and a 7 percent rate is more realistic. f-1. If Plant still offers $26 per share, what is the NPV with this new growth rate? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ f-2. If Plant still offers 239,000 shares, what is the NPV with this new growth rate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $

Plant, Inc., is considering making an offer to purchase Palmer Corp. Plant’s vice president of finance has collected the following information:
Plant Palmer
Price–earnings ratio 15.5 11.1
Shares outstanding 1,600,000 850,000
Earnings $ 4,640,000 $ 1,173,000
Dividends $ 1,060,000 $ 480,000

Plant also knows that securities analysts expect the earnings and dividends of Palmer to grow at a constant rate of 3 percent each year. Plant management believes that the acquisition of Palmer will provide the firm with some economies of scale that will increase this growth rate to 5 percent per year.

a.

What is the value of Palmer to Plant? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Value of Palmer $

b.

What would Plant’s gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Gain $

c.

If Plant were to offer $31 in cash for each share of Palmer, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV $
d.

What is the most Plant should be willing to pay in cash per share for the stock of Palmer? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Maximum bid price $
e.

If Plant were to offer 235,000 of its shares in exchange for the outstanding stock of Palmer, what would the NPV be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV $

Plant's outside financial consultants think that the 5 percent growth rate is too optimistic and a 4 percent rate is more realistic.
f-1.

If Plant still offers $31 per share, what is the NPV with this new growth rate? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV $

f-2.

If Plant still offers 235,000 shares, what is the NPV with this new growth rate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV $

Plant, Inc., is considering making an offer to purchase Palmer Corp. Plant’s vice president of finance has collected the following information: Plant Palmer Price–earnings ratio 15.3 10.8 Shares outstanding 1,580,000 830,000 Earnings $ 4,550,400 $ 1,128,800 Dividends $ 1,058,000 $ 478,000 Plant also knows that securities analysts expect the earnings and dividends of Palmer to grow at a constant rate of 5 percent each year. Plant management believes that the acquisition of Palmer will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of Palmer to Plant? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of Palmer $ b. What would Plant’s gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Gain $ c. If Plant were to offer $28 in cash for each share of Palmer, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ d. What is the most Plant should be willing to pay in cash per share for the stock of Palmer? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum bid price $ e. If Plant were to offer 233,000 of its shares in exchange for the outstanding stock of Palmer, what would the NPV be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ Plant's outside financial consultants think that the 7 percent growth rate is too optimistic and a 6 percent rate is more realistic. f-1. If Plant still offers $28 per share, what is the NPV with this new growth rate? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ f-2. If Plant still offers 233,000 shares, what is the NPV with this new growth rate? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $