Company Hoboken $($H$)$ Inc. is considering acquiring Company Union City $($UC$)$

Inc. in a merger deal. The financial details of both companies are as follows $($If you

think appropriate, please feel free to make additional assumptions.$)$:

Company H$$s Financial Details:

$$ Current Market Capitalization: $$800$ million

$$ Annual Revenue: $$150$ million

$$ Net Profit Margin: $10\%$

$$ Total Debt: $$200$ million

$$ Cash and Cash Equivalents: $$50$ million

$$ Interest: $$10$ million

$$ Depreciation and Amortization: $$35$ million

Company UC$$s Financial Details:

$$ Current Market Capitalization: $$600$ million

$$ Annual Revenue: $$120$ million

$$ Net Profit Margin: $8\%$

$$ Total Debt: $$150$ million

$$ Cash and Cash Equivalents: $$30$ million

$$ Interest: $$10$ million

$$ Depreciation and Amortization: $$25$ million

The companies have agreed on a purchase price of $$1\mathrm{.}2$ billion for Company UC$.$

Calculate the following financial metrics to help Company A evaluate the potential

merger:

$1.$ EBIT, Depreciation, and Amortization $($EBITDA$)$ Multiples:

o Calculate the EBITDA for both companies.

o Determine the EBITDA multiples for Company H and Company UC$.$

o Comment on the valuation based on EBITDA multiples.

$2.$ Debt$-$to$-$Equity Ratio Post$-$Merger:

o Calculate the Debt$-$to$-$Equity ratio for both companies individually.

o Determine the Debt$-$to$-$Equity ratio for the combined entity post$-$merger.

o Analyze the impact of the merger on the leverage of the combined

company.

$3.$ Net Profit Margin Post$-$Merger:

o Calculate the Net Profit for both companies individually.

o Determine the Net Profit Margin for the combined entity post$-$merger.

o Discuss the potential impact of the merger on the overall profitability.

$4.$ Cash Position Post$-$Merger

o Calculate the Net Cash position $($Cash and Cash Equivalents minus Total

Debt$)$ for both companies individually.Problem $1$

Company Hoboken $($H$)$ Inc. is considering acquiring Company Union City $($UC$)$

Inc. in a merger deal. The financial details of both companies are as follows $($If you

think appropriate, please feel free to make additional assumptions.$)$:

Company H$\text{'}$s Financial Details:

Current Market Capitalization: $$800$ million

Annual Revenue: $$150$ million

Net Profit Margin: $10\%$

Total Debt: $$200$ million

Cash and Cash Equivalents: $$50$ million

Interest: $$10$ million

Depreciation and Amortization: $$35$ million

Company UC's Financial Details:

Current Market Capitalization: $$600$ million

Annual Revenue: $$120$ million

Net Profit Margin: $8\%$

Total Debt: $$150$ million

Cash and Cash Equivalents: $$30$ million

Interest: $$10$ million

Depreciation and Amortization: $$25$ million

The companies have agreed on a purchase price of $$1\mathrm{.}2$ billion for Company UC$.$

Calculate the following financial metrics to help Company A evaluate the potential

merger:

EBIT, Depreciation, and Amortization $($EBITDA$)$ Multiples:

Calculate the EBITDA for both companies.

Determine the EBITDA multiples for Company H and Company UC$.$

Comment on the valuation based on EBITDA multiples.

Debt$-$to$-$Equity Ratio Post$-$Merger:

Calculate the Debt$-$to$-$Equity ratio for both companies individually.

Determine the Debt$-$to$-$Equity ratio for the combined entity post$-$merger.

Analyze the impact of the merger on the leverage of the combined

company.

Net Profit Margin Post$-$Merger:

Calculate the Net Profit for both companies individually.

Determine the Net Profit Margin for the combined entity post$-$merger.

Discuss the potential impact of the merger on the overall profitability.

Cash Position Post$-$Merger

Calculate the Net Cash position $($Cash and Cash Equivalents minus Total

Debt$)$ for both companies individually.

Determine the Net Cash position for the combined entity post$-$merger.

Evaluate the liquidity position of the combined company post$-$merger.

Assume that the financial figures provided are the most recent fiscal year, and any

calculations should be rounded to the nearest million for expositional simplicity.