Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

One month after this deal is announced, the market becomes very skeptical of the potential synergies. Company A ' s share price declines so that

One month after this deal is announced, the market becomes very skeptical of the "potential synergies." Company A's share price declines so that it reflects an expectation that Company B is worth only its pre-deal-announcement Equity Value of $80.

For your reference, the Excel setup from the previous question is shown below:

In this scenario, which of the following will NOT happen? 

A) The combined equity value and combined enterprise value will both decrease by $20.

B) The equity purchase price will stay the same, so company A will use the same dollar amounts of Debt and stock to fund the deal 

C) Since company A will use the same dollar amounts of debt and stock to acquire company B, the EPS accretion/dilution will reamain the same.

D) The combined Net income and EBITDA will be the same because each company's seperate Net income and EBITDA will be the same, and the interest expense on the transaction debt will not change.

image text in transcribed 

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

13th Edition

9780470374948, 470423684, 470374942, 978-0470423684

More Books

Students also viewed these Accounting questions

Question

Discuss the various steps involved in the process of planning

Answered: 1 week ago

Question

What are the challenges associated with tunneling in urban areas?

Answered: 1 week ago

Question

What are the main differences between rigid and flexible pavements?

Answered: 1 week ago

Question

What is the purpose of a retaining wall, and how is it designed?

Answered: 1 week ago

Question

How do you determine the load-bearing capacity of a soil?

Answered: 1 week ago