12.12 The acquiring company buys 100% of the target company’s equity for $5 million in cash. As an analyst, you are given the premerger balance sheets for the two companies (Table 12.7). Assuming plant and equipment are revalued upward by $500,000, what will be the combined companies’ shareholders’ equity plus total liabilities? What is the difference between the acquiring company’s shareholders’ equity and the shareholders’

equity of the combined companies? (Appendix)

Acquiring company Target company Current assets 600,000 800,000 Plant and equipment 1,200,000 1,500,000 Total assets 1,800,000 2,300,000 Long-term debt 500,000 300,000 Shareholders’ equity 1,300,000 2,000,000 Shareholders’ equity þ total liabilities 1,800,000 2.300,000