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1) a) Company Y has inventory worth $200mm and PP&E worth $500mm and no other assets. Company X buys company Y for $1B in cash.

a) Company Y has inventory worth $200mm and PP&E worth $500mm and no other assets. Company X buys company Y for $1B in cash. What happens to the company X balance sheet after the acquisition?

b) Since company X paid $1B for only $700mm of assets, does it necessarily mean that they overpaid for company Y?Why?

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