Goliath is a family owned business which is going to purchase David. Goliath is trying to decide whether to purchase David using all stock as acquisition currency or all debt (the total purchase price will be the same either way). If they were to use all stock, Goliath would need to issue 98 million new shares to Davids shareholders. Alternatively, Goliath believes it could get a bank loan for the entire purchase price at an interest rate of 2.7%. Additional information is summarized below. Assume no accounting impact or transaction costs.

A. If Goliath uses stock to purchase the David, what would Goliaths family ownership of the combined company be? Please show your work and round the percentage to at least two decimal places. (2 Marks)

B. How much Pro Forma Net Income would be owned by Goliaths controlling family under each financing scenario? Please show your work and provide a precise net income amount. (6 Marks)

EBIT Interest Tax Rate Buyer $219,205,000 $0 34.0% Target $35,782,000 $0 34.0% Buyer Stock Price Buyer Shares Outstanding (Pre-Dcal) Buyer Family Ownership (Pre-Deal) $12.54 495,000,000 61.0% EBIT Interest Tax Rate Buyer $219,205,000 $0 34.0% Target $35,782,000 $0 34.0% Buyer Stock Price Buyer Shares Outstanding (Pre-Dcal) Buyer Family Ownership (Pre-Deal) $12.54 495,000,000 61.0%