Suppose Firm X buys Firm Y for $36 million in cash. To finance the purchase, X borrowed the entire amount. The balance sheet of X and Y is as follows. Create a post-merger balance sheet using the acquisition accounting method.

	Balance Sheet - X (in m $)
in advance	25	Debt	20
fixed assets	95	Equality	100
	120		120

	Balance Sheet - Y (in m$)
in advance	4	Equality	30
fixed assets	26
	30		30

Principal, Inc. is acquiring Secondary Companies for $29 million in cash. The Director has 2.5 million outstanding shares at a market price of $30 per share. The secondary has 1.6 million shares outstanding at a market price of $15 per share. Neither firm has any debt. The synergy gain of the acquisition is $4.5 million. What is the NPV of the purchase?

Global Tours is analyzing the possible acquisition of Eastern Vacations. Due to increased efficiency, Global Tours estimates that the combined company could save $600,000 in annual after-tax cash flows for the uncertain future. An investment bank estimates Global Tours are worth $30 million and $15 million, respectively. Global Tours uses 15% opportunity cost of capital to discount increased cash flows.

What is the synergy arising from the merger?

If Global Tours offers $16 million cash for Eastern Vacations, what is the premium (cost) of the merger? What is the NPV of the merger?

If Global Tours offers 35% of the combined company to Eastern Vacations owners, what is the premium (cost) of the merger? What is the NPV of the merger?

Barrison is investigating the possible acquisition of Soulmaster. The two firms have the following key data:

Barrison Spirit Master

Number of shares 3,000,000 1,200,000

Current stock price $75.00 $25.00

The combined firm will result in a synergy gain of $15 million.

A. What is the value of the combined firm?

What is the NPV of the purchase if B. Barrison pays $30 in cash for each share of Soulmaster?

C. If Barrison offers one share of Barrison for both shares of Soulmaster, what is the NPV of the purchase?