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On September 1, 2019, Illy Inc. acquired 80% of the voting shares of MEK Inc. (MEK had 10,000 outstanding shares on the acquisition date) for
On September 1, 2019, Illy Inc. acquired 80% of the voting shares of MEK Inc. (MEK had 10,000 outstanding shares on the acquisition date) for $112,000 Cash. On that day, MEKs share had a market price of $12 per share, and total $90,000 carrying value for its net assets. The CEO of the company desired a nice looking on ROE i.e., return on equity. He asked your opinion regarding the valuation of shares not acquired.
Required: based on the information given,
- Provide your recommendation
- Theoretically support your recommendation
- Calculate all the numbers that can support your recommendation
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