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Your company has earnings per share of $4. It has 1 million shares outstanding, each of which has a price of $40. You are thinking of buying Target Co, which has earnings per share of $2, 1 million shares outstanding, and a price per share of $25. You will pay for Target Co by issuing new shares. There are no expected synergies from the transaction.
a. If you pay no premium to buy Target Co, what will your earnings per share be after the merger?
b. Suppose you offer an exchange ratio such that, at current preannouncement share prices for both firms, the offer represents a 20% premium to buy TargetCo. What will your earnings per share be after the merger?
c. What explains the change in earnings per share in part (a)? Are your shareholders any better or worse off?
d. What will your price-earnings ratio be after the merger (if you pay no premium)? How does this compare to your P/E ratio before the merger? How does this compare to Target Co's premerger P/E ratio?
Prior to maturity, when the carrying value of the bonds was $105,000 scott retired the bonds at 102. Prepare the journal entries for redemption of the bond.
Revson Corporation purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred in purchasing the land were as follows:
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ROCE measures return on assets after the fact. ARR measures potential returns. Why might a finance department be quizzing the proposal manager (PM) about the ARR? And more importantly, why is it important that the PM give a reasonable ARR?
Which one of the following varies between the equity, initial value and partial equity methods of accounting for an investment in a subsidiary?
Your friend, Wendy Geiger, owns a small retail store that sells canies and nuts. Geiger acquires her goods from a few select vendors. She generally makes purchase orders by phone and on credit. Sales are primarily for cash. Geiger keeps her own ma..
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An enterprise that holds a variable interest in variable interest entity is required to consolidate assets, liabilities, revenues and expenses, and the non-controlling interest of that entity if:
Donkey Company manufactures two products, Standard and DeLuxe. Donkey's overhead costs consist of machining, $2,000,000; and assembling, $1,000,000. Information on the two products is:
The founders of an acquired company are granted a contingent payment for three years after the acquisition based on those years earnings:
Mr. Rosen is the manager of a division of Jokkmok Industries. He is one of several managers being considered for the position of CEO, as the current CEO is retiring in a year.
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