On September 9, 2023, each company receives an offer from a well-known private equity firm ("PE firm") in Toronto to acquire a 25% equity stake. The PE firm intends to fund this transaction by cash only. However, the existing shareholders are uncomfortable with the potential deal as they believe that they will be disadvantaged and have expressed their concerns to the Board of Directors of each company. The Board of each company has engaged your firm to advise them on the potential impact of the proposed transaction. Your manager, who is a partner in your firm is the lead on this engagement and has asked you to prepare the calculations to advise the Board of Directors of each company. A junior staff on your team has done further research on the companies and have noted the following: 

a. Each company issued 100,000 10% convertible bonds that are convertible into 10 commons shares each at the option of the bondholders at any time, including a triggering event (a change in the ownership structure); and 

b. To attract new talents on the executive team, each company issued 1,000,000 options in relation to these share-based compensation at an exercise price of .50 cents. The option agreement indicates that these options shall vest either in 3 years from the issue date or a triggering event (include a change in the ownership structure of the company). 

Required

i. Calculate the value of each company using the "Market Capitalization" on September 9, 2023 with total common shares is 504,925,317

ii. Determine how much the potential purchaser, the PE firm, must pay for a 25% equity stake in each company. 

iii. Determine the number of shares that must be issued from treasury for each company for the 25% equity stake. 

iv. Determine the total number of shares that will be issued and outstanding if the potential transaction were to be approved by the board of each company. 

v. Show the revised capital structure of each company if the proposed transaction were to be approved by the board of each company. 

vi. Use the last fiscal year earnings data, and take into consideration the convertible bonds and the options that were issued after the last fiscal year, but before your company received this engagement to and the potential transaction to:

i. Calculate the potential impact on the basic earnings per share;

ii. Calculate the potential impact on the diluted earnings per share; and

iii. Provide a written response to the board of each company as to the potential impact of approving the potential transaction.