Exam 27: Corporate Restructuring

When the market value of a company's common stock is below the replacement value of the firm's net assets, this company is frequently referred to as a possible ____.

In analyzing a merger, the ____ is the number of the acquiring company shares received per share of acquired company stock owned.

Technical insolvency occurs when the ____.

The process of liquidating a business outside of the jurisdiction of the bankruptcy courts is called a(n) ____.

Under Chapter(s) ____ of the bankruptcy laws, a company's assets are sold off and the proceeds are distributed to the creditors.

The reasons why a company may choose external growth by merger over internal growth include ____.

The annual after-tax free cash flow from the acquisition by Pacific Care of Universal Health is projected to be $12 million. These flows are expected to continue for 20 years. No value is placed on cash flows beyond 20 years. If the appropriate risk-adjusted discount rate for the merged firm is 15%, what is the maximum amount Pacific Care should pay to acquire Universal Health?

The acquisition of a company in which the buyer borrows a large amount of the purchase price, using the purchased assets as collateral for a large portion of the borrowings, is known as a ____.

Chapter 11 bankruptcy proceedings may be initiated by ____ or more of its unsecured creditors who have aggregate claims of at least ____.

Essex Industries is considering the acquisition of Twinsburg Company in a stock-for-stock exchange. The following financial data are available on both companies. (Assume no synergy is expected with this merger.) Calculate answers to nearest 0.001. ? Essex Twinsburg Sales \ 500 million \ 50 million Net income \ 40 million \ 3.74 million Common shares outstanding 5 million 1 million Earnings per share \ 8.00 \ 3.74 Dividends per share \ 3.00 \ 1.00 Common stock market price \ 64 \ 24 Pricelearnings ratio 8 6.42 ? EPS = $43,740,000/5,400,000 = $8.10 ? What is Essex's post-merger share price if the post-merger price/earnings ratio is 7.5, and the exchange ratio is 0.4? Assume total post-merger earnings are $43,740,000.

How does a joint venture differ from a holding company?

A combination of two or more companies that compete directly with each other is known as a ____.

In general, the greatest economies of scale are possible with ____ mergers.

A(n) ____ is a situation in which a failing business is permitted to discharge its debt obligations by paying less than the full amounts owed to creditors.

Millicom is acquiring Vikonic's outstanding common stock for $15 million. Financial information (in $ millions) on these two firms prior to the acquisition is as follows: ? ? Millicom Vikonic Total assets, book value \ 90 \ 40 Liabilities, book value 40 27 Stockholders' equity, book value 50 13 ? What are the total assets and stockholders' equity (in $ millions) if the purchase method is used as the accounting method for this merger?

Whipple Industries is considering the acquisition of Blanchard Company in a stock-for-stock exchange. Selected financial data for the two companies is shown below. No synergy is expected in this merger. Whipple Blanchard Sales (millions) \ 150 \ 30 Net income (millions) \ 25 \ 3.5 Common shares outstanding (millions) 8 2 Earnings per share \ 3.125 \ 1.75 Dividends per share \ 1.50 \ 0.75 Common stock price per share \ 40 \ 19.50 ? Determine the post-merger earnings per share if the Blanchard company shareholders accept an offer of $22 per share in a stock-for-stock exchange.

An antitakeover measure where a company attempts to buy back its shares of stock at a premium from the company or investor who initiated the unfriendly takeover is ____.

A(n) ____ is a situation in which a failing business is permitted to lengthen the amount of time it has to meet its obligations with creditors.

Legal insolvency occurs when the ____.

Millicom is acquiring Vikonic's outstanding common stock for $15 million. Financial information (in $ millions) on these two firms prior to the acquisition is as follows: ? ? Millicom Vikonic Total assets, book value \ 90 \ 40 Liabilities, book value 40 27 Stockholders' equity, book value 50 13 ? What are the total assets and stockholders' equity (in $ millions) if the pooling of interests method had been used as the accounting method for this merger?