Assume that Firm X acquires Firm Y by paying $36m of cash. To finance for the acquisition, X borrowed the entire amount. The balance sheet of X and Y are as follow. Construct a post merger balance sheet using the purchase method of accounting.

	Balance Sheet - X (in $m)
Cash	25	Debt	20
Fixed Assets	95	Equity	100
	120		120

	Balance Sheet - Y (in $m)
Cash	4	Equity	30
Fixed Assets	26
	30		30

Principal, Inc. is acquiring Secondary Companies for $29 million in cash. Principal has 2.5 million shares of stock outstanding at a market price of $30 a share. Secondary has 1.6 million shares of stock outstanding at a market price of $15 a share. Neither firm has any debt. The synergy gains of the acquisition is $4.5 million. What is the NPV of the acquisition?

Global Tours is analyzing the possible acquisition of Eastern Vacations. Due to the improved efficiency, Global Tours estimates that the combined firm could save $600,000 of annual after tax cash flows for the indefinite future. An investment bank estimates that Global Tours are worth $30m and $15m respectively. Global Tours uses 15% opportunity cost of capital to discount its incremental cash flows.

What is the synergy from the merger?

If Global Tours offers $16m cash for Eastern Vacations, what is the premium (cost) of the merger?What is the NPV of the merger?

If Global Tours offers 35% of the combined firm to owners of Eastern Vacations, what is the premium (cost) of the merger?What is the NPV of the merger?

Barrison is investigating the possible acquisition of Soulmaster. The two firms have the following basic data:

Barrison Soulmaster

Number of shares 3,000,000 1,200,000

Current stock price $75.00 $25.00

The combined firm will result in a synergy gains of $15m.

a. What is the value of of the combined firm?

b. What is the NPV of acquisition if Barrison pays $30 in cash for each share of Soulmaster?

c. What is the NPV of the acquisition if Barrison offers one share of Barrison for every two shares of Soulmaster?