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Consider the following premerger information about Firm X and Firm Y: Firm X Firm Y Total earnings $ 96,000 $ 22,500 Shares outstanding 53,000 18,000
Consider the following premerger information about Firm X and Firm Y: |
Firm X | Firm Y | |||||
Total earnings | $ | 96,000 | $ | 22,500 | ||
Shares outstanding | 53,000 | 18,000 | ||||
Pre-share values: | ||||||
Market | $ | 53 | $ | 18 | ||
Book | $ | 14 | $ | 8 | ||
Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $5 per share, and that neither firm has any debt before or after the merger. |
a. | Assuming the pooling of interests method is used, what is the equity of the combined firm? |
Equity value | $ |
b. | List the assets of the combined firm assuming the purchase accounting method is used. |
Assets from X | $ |
Assets from Y | |
Goodwill | |
Total Assets XY | $ |
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