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QUESTION 1 Agway Company has 37,500 shares outstanding at a market price per share of $29.60. Berkshire Company has 155,000 shares outstanding at a market

QUESTION 1

  1. Agway Company has 37,500 shares outstanding at a market price per share of $29.60. Berkshire Company has 155,000 shares outstanding at a market price of $48 a share. Neither firm has any debt. Berkshire is acquiring Agway for $1,232,000 in cash. What is the merger premium per share?
  2. $2.75
  3. $3.00
  4. $3.25
  5. $3.50
  6. $3.75

10 points

QUESTION 2

  1. GenCorp and Harsco are all-equity firms. GenCorp has 62,000 shares outstanding at a market price of $54.70 a share while Harsco has 48,000 shares outstanding at a price of $42.50 a share. GenCorp is acquiring Harsco for $2,220,000 in cash. The incremental value of the acquisition is $374,000. What is the net present value of acquiring Harsco to GenCorp?
  2. $169,000
  3. $178,000
  4. $185,000
  5. $194,000
  6. $202,000

10 points

QUESTION 3

  1. The acquisition of a firm in the same industry as the bidder is called a _____ acquisition.
  2. conglomerate
  3. forward
  4. backward
  5. horizontal
  6. vertical

10 points

QUESTION 4

  1. Lincoln Corporation is acquiring Marathon Corporation for $1,680,000 in cash. Lincoln has 60,000 shares of stock outstanding at a market value of $61.80 a share. Marathon has 33,000 shares of stock outstanding at a market price of $45.40 a share. Neither firm has any debt. The net present value of the acquisition is $156,000. What is the price per share of Lincoln after the acquisition?
  2. $64.40
  3. $63.92
  4. $63.54
  5. $62.98
  6. $62.61

10 points

QUESTION 5

  1. Johnson Company is acquiring Kellogg Company for $1,310,000 in cash. Johnson has a current market value of $1,792,000 while Kellogg s current market value is $1,156,000. The synergy value from the acquisition is $218,000. What is the value of Johnson after the acquisition?
  2. $1,829,000
  3. $1,856,000
  4. $1,871,000
  5. $1,894,000
  6. $1,912,000

10 points

QUESTION 6

  1. Cintas and Delphi are all-equity firms. Cintas has 24,500 shares outstanding at a market price of $41.70 a share. Delphi has 50,000 shares outstanding at a price of $63 a share. Delphi is acquiring Cintas for $1,092,000 in cash. The synergy of the acquisition is $149,000. What is the value of Cintas to Delphi?
  2. $1,170,650
  3. $1,202,750
  4. $1,241,650
  5. $1,273,250
  6. $1,297,350

10 points

QUESTION 7

  1. Nacco Corporation has market value of $2,870 while Omnicom has a market value of $4,120. Omnicom is merging with Nacco and expects the combined firm to have a market value of $7,780. If the current Nacco shareholders obtain $3,120 of equity in the new firm, how much synergy was allocated to the Omnicom shareholders?
  2. $260
  3. $180
  4. $420
  5. $540
  6. $0

10 points

QUESTION 8

  1. A proposed acquisition may create synergy by doing all of the following except:
  2. increasing the market power of the combined firm.
  3. improving the distribution network of the acquiring firm.
  4. reducing the acquiring firm s distribution costs.
  5. reducing the utilization of the acquiring firm's assets.
  6. providing the combined firm with a strategic advantage.

10 points

QUESTION 9

  1. Ecolab and Ferro are all-equity firms. Ecolab has 185,000 shares outstanding at a market price of $39.60 a share. Ferro has 590,000 shares outstanding at a price of $68.30 a share. Ferro is acquiring Ecolab for $8,140,000 in cash. The synergy value of the acquisition is $1,427,000. What is the net present value of acquiring Ecolab to Ferro?
  2. $568,000
  3. $580,000
  4. $591,000
  5. $602,000
  6. $613,000

10 points

QUESTION 10

  1. Perot is planning on merging with Rockwell. Perot currently has 75,000 shares of stock outstanding at a market price of $47.20 a share. Rockwell has 61,000 shares outstanding at a price of $31.30 a share. The merger will create $330,000 of synergy. How many of its shares should Perot offer in exchange for all of Rockwell's share if it wants its acquisition cost to be $2,140,000?
  2. A. 43,628
  3. B. 44,102
  4. C. 44,510
  5. D. 44,866
  6. E. 49,120

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