8.15 Best’s Foods is seeking to acquire the Heinz Baking Company, whose shareholders’ equity and goodwill are

$41 million and $7 million, respectively. A comparable bakery was recently acquired for $400 million, 30%

Balance sheet item Book value of assets Liquidation value Cash $10 Accounts receivable $20 Inventory $15 Net fixed assets excluding land $8 Land $6 Total assets $59 Total liabilities $35 Shareholders’ equity $24 more than its tangible book value (TBV). What was the tangible book value of the recently acquired bakery?
How much should Best’s Foods expect to pay for the Heinz Baking Company? Show your work.
Answer: The TBV of the recently acquired bakery = $307.7 million, and the likely purchase price of Heinz = $44.2 million.