Business Case-Paper & Ink Corporation Paper & Ink Corporation is a manufacturer of computer paper and ink cartridges that supplies independent convenient stores, phamacies, and hardware stores with a small inventory of personal computer (printer) supplies. These stores sell com paper and ink s to their customers, who are primanly individual consumers. Paper & Ink Corporation is able to keep their costs down by selling directly (not through a wholesaler) to the independent convenient stores, pl and hardware stores. Still, harmacies, increasing direct competition from online wholesalers (independent convenient stores, pharmacies and hardware stores can order online as an altermative supplier) and the indirect competition from large computer supply stores (ie. OfficeMax) has negatively impacted Paper & Ink Corporation's sales (Paper & Ink Corporation is losing market share). After an extensive intermal review the executive management team of Paper & Ink Corporation has determined that the company needs to diversify its product offerings to better differentiate themselves from their competition. Their idea is to add a new product line that will benefit both Paper & Ink Corporation and their customer The key product that they have decided to add is ink refill capsules. The capsules come in two sizes: an individual (one ink cartridge refill) and a multiple (100 ink cartridge refill). The decision to add ink refill capsules was based on areview of the company's internal and external strengths and weaknesses. Assume that on January 1, 2012 Paper & Ink Corporation (parent company acquired 75% of the stock of Smooth Solutions (subsidiary company for $31,000,000 (approximately 1.5x sales). Smooth Solutions stockholders have agreed to accept a combination of cash and Paper& Ink Corporation stock as payment. The stock price of Paper & Ink Corporation (market price per NASDAQ) at the market close on December 31,2011 was $25/share. 31.000.000 Purchase Price: Payment: Cash 3,100,000 27,900,000 Stock Mkt Price 25 of Shares 1,116,000 The following are the financial statements (balance sheet) for the two companies immediately before the acquisition. 2017 Joel R. Wilson. All Rights Reserved. Page 3