Q.

XYZ is planning to acquire ABC firm. The resulting synergy is expected to be 150. In a friendly negotiation, ABC shareholders asked for $50 premium. The value of both firms before merger is as follows:

XYZ ABS

MV 800 500

# of shares 100 50

Price 8 10

A. Compute the Value of XYZ after the question if the acquisition is cash acquisition. Answer: 900

B. Compute the NPV for XYZ if the acquisition is cash acquisition. Answer: 100

C. What is the Total Shares after merger if the acquisition is stock acquisition. Answer: 158

Q.

the capital structure by issuing $100,000 of debt at 7 percent interest. The debt will be used to repurchase shares of stock. You own 100 shares of Haithams stock. You also loan out funds at 7 percent interest. Assume you loan out all of the funds you receive from the sale of stock. Ignore taxes.

A. How many shares of Haitham's stock must you sell to offset the leverage that Haitham is assuming?

B. What will happen to your wealth as a result of the firms decision?

17) Noorah saloom's company has $3.5 million in net working capital. The firm has fixed assets with a book value of $23.23 million and a market value of $24.5 million. The firm has no long-term debt. Ahmad Company is buying Haithams Company for $36 million in cash. The acquisition will be recorded using the purchase accounting method. What is the amount of goodwill that Ahmad Company will record on its balance sheet as a result of this acquisition?