Sun Company is contemplating a tender offer to acquire 80% of Moon Corporation's common stock. Moon,s shares are currently quoted on the New York stock Exchange at $25 per share. In order to have a reasonable chance of the tender offer attracting 80% of Moon,s stock, Sun believes it will have to offer at least $30 per share. if the tender offer is made and is successful, the purchase will be consummated on January 1,2024 . Michael Jackson, the chairperson of Sun,s acquisitions committee, has provided you with the projected 2024 financial statements for Sun Company without proposed acquisition and the 2024 projected financial statements of the Moon Company in the table below. Sales, Sun 2024 $275,000, Moon 2024, $35,000 Cost of goods sold , (174,000) ( 18500) Operating expenses, (82,000) (4500) Income before taxes 18 600, 12,000 Income tax expense. (7440) ( 3,600) Net income. 11,160 8,400 Retained earnings January 1 11,660 4800 Add: net income. 11,160 8400 less dividends. (5000) (1500) Retained earnings, December 31, 17,820, 11700 cash. 20170, 7,500 Accounts receivables 13,775, 4,300 inventory. 12,875, 4,000 PPE. 228,000, 50,000 Accumulated Depre, (176,000), (9000) Total Assets. 98,220, 56800 Accounts payable, 13400, 7000 Common stock, 65,000, 30,000 paid in Capital in Excess of Par 2,000, 8,100 Retained earnings, 17820, 11700 Total liabilities and Stockholders equity 284200, 229500 Parent: $12.50 Par; Subsidiary; $75 par.

As of January 1,2024,all of Moon Company assets and liabilities are fairly valued except for machinery with a book value of $5,000, an estimated fair value of $6000, and a 5-year remaining useful life. Assume that straight-line depreciation is used to amortize any revaluation increment. No transaction between these companies occurred prior to 2024. Regardless of whether they combine, Sun Company plans to buy $15,000 of merchandise from Moon Company in 2024 and will have $1,200 of these purchases remaining in inventory on December 31,2024. In addition, Moon is expected to buy $900 of merchandise from Sun 2024 and to have $150 of these purchases in inventory on December 31,2024. Sun and Moon price their products to yield a 20% and 25% markup on cost, respectively. Sun Company intends to use three financial yardsticks to determine the financial attractiveness of the combination. First, Sun wishes to acquire Moon only if 2024 consolidated earnings per share will be at least as high as the earnings per share Sun would report if no combination takes place. Second, Sun will consider the proposed combination unattractive if it will cause the consolidated current ratio to fall below two to one. Third, return on average stockholders equity must remain above 20% for the combined entity. If the financial yardsticks described above and the nonfinancial aspect of the combination are appealing, then the tender offer will be made. On the other hand, if these objectives are not met, the acquisition will either be restructured or abandoned. Requirements: 1. Prepare Pro forma financial statements of Sun Company to reflect the proposed acquisition. 2. Prepare a pro forma consolidated worksheet for Sun Company and its proposed subsidiary Moon Company as of December 31,2024. 3. Perform ratio analysis. Compute earnings per share, current ratio, and return on average stockholders equity for, i) the 2024 projected financial statements of Sun Company without acquisition as given in the question: and ii) the consolidated financial statements contained in the pro forma consolidated worksheet prepared in requirement #2 of phases I. 4. prepare a narrated PowerPoint presentation summarizing the results of your analysis, including a summary of the financial ratios you computed and your recommendation.