Exam 26: Mergers and Acquisitions

The Daily News published an ad today wherein it announced its desire to purchase shares of a competing newspaper,the Oil Town Gossip.Which one of the following terms is best described by this announcement?

Sleep Tight is acquiring Restful Inns for $52,500 in cash.Sleep Tight has 3,000 shares of stock outstanding at a market price of $38 a share.Restful Inns has 2,100 shares of stock outstanding at a market price of $24 a share.Neither firm has any debt.The incremental value of the acquisition is $1,700.What is the price per share of Sleep Tight after the acquisition?

Nelson's Interiors has $1.52 million in net working capital.The firm has fixed assets with a book value of $23.23 million and a market value of $26.16 million.The firm has no long-term debt.The Home Centre is buying Nelson's Interiors for $29.5 million in cash.The acquisition will be recorded using the purchase accounting method.What is the amount of goodwill that The Home Centre will record on its balance sheet as a result of this acquisition?

Consider the following premerger information about Firm X and Firm Y: Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $3 per share.Also assume that neither firm has any debt before or after the merger.What is the value of the total equity of the combined firm,XY,if the purchase method of accounting is used?

Which of the following increase the costs associated with a merger?

Aardvark Enterprises has agreed to be acquired by Lawson Products in exchange for $30,000 worth of Lawson Products stock.Lawson has 3,000 shares of stock outstanding at a price of $28 a share.Aardvark has 1,100 shares outstanding with a market value of $23 a share.The incremental value of the acquisition is $1,400.What is the value of Lawson Products after the merger?

Johnson Manufacturers and Peabody Enterprises are both manufacturers of plastic products,such as plastic plates and silverware.These two firms have decided to work together to find a more efficient way to recycle rejected products so that any rejected material can be reused.Thus,each company is going to assign two of its engineers to this project and have agreed to share any and all costs incurred in this process.This project is an example of a:

Which of the following is a form of a takeover? I.tender offer II.merger III.proxy contest IV.going private transaction

Alpha is planning on merging with Beta.Alpha will pay Beta's shareholders the current value of their stock in shares of Alpha.Alpha currently has 4,200 shares of stock outstanding at a market price of $40 a share.Beta has 2,500 shares outstanding at a price of $18 a share.The after-merger earnings will be $8,800.What will the earnings per share be after the merger?