Question $8$ of $34$

Company A acquires Company B for $$1,000,$ using $50\%$ Stock and $50\%$ Debt. Company B has $$1,000$ in Total Assets and $$500$ in

Total Liabilities. Company A plans to allocate $60\%$ of the purchase premium to Goodwill and the remaining $40\%$ to Other

Intangible Assets, with a useful life of $5$ years.

Company A will pay an $8\%$ interest rate on the Debt used to fund this deal. Company $B$ will contribute $$200$ in Revenue and

$$100$ in Operating Expenses to Company $A$ in the first year following the acquisition.

Walk through the financial statements over the first year and explain how Company A$\text{'}$s Cash balance changes from beginning

to end. Use a $25\%$ tax rate and assume that the Amortization of Intangibles is NOT Cash$-$Tax Deductible.

Cash is up by $$45.$

Cash is up by $$55.$

Cash is up by $$15.$

Cash is unchanged.