Narnia Enterprises is considering an acquisition of Aslan Inc, motivated by the possibility of synergy. You...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Narnia Enterprises is considering an acquisition of Aslan Inc, motivated by the possibility of synergy. You are given the following estimates for key numbers the two firms (with all dollar values in millions): EBIT (1-1) next year Narnia Aslan $160 $40 Expected growth rate 2% (perpetuity) Invested Capital Cost of capital $1 600 8% 2% $500 8% After the merger, Narnia believes that it can sell Aslan's distribution system for book value; this system accounts for $100 million in invested capital and is expected to have after-tax operating expenses of $10 million next year, without affecting growth or cost of capital. Assuming that both companies were fairly valued before the merger and that Narnia paid a 50% premium (over value) to acquire Aslan, how much value did this merger create or destroy for Narnia's stockholders? Mark the correct answer. Narnia Enterprises is considering an acquisition of Aslan Inc, motivated by the possibility of synergy. You are given the following estimates for key numbers the two firms (with all dollar values in millions): EBIT (1-1) next year Narnia Aslan $160 $40 Expected growth rate 2% (perpetuity) Invested Capital Cost of capital $1 600 8% 2% $500 8% After the merger, Narnia believes that it can sell Aslan's distribution system for book value; this system accounts for $100 million in invested capital and is expected to have after-tax operating expenses of $10 million next year, without affecting growth or cost of capital. Assuming that both companies were fairly valued before the merger and that Narnia paid a 50% premium (over value) to acquire Aslan, how much value did this merger create or destroy for Narnia's stockholders? Mark the correct answer.
Expert Answer:
Related Book For
Intermediate Financial Management
ISBN: 9780357516669
14th Edition
Authors: Eugene F Brigham, Phillip R Daves
Posted Date:
Students also viewed these finance questions
-
The Cutting Department of Sheridan Company has the following production and cost data for July. Production Costs 1. Completed and transferred out 11,040 units. Beginning work in process 2.760 units...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Burke Fabricators completed two jobs in June. Burke Fabricators recorded the following costs assigned to the jobs by the companys activity-based costing system: Job 622 required 2,400 parts, 77,500...
-
You have a portfolio with a standard deviation of 30% and an expected return of 18%. You are considering adding one of the two stocks in the table below. If after adding the stock you will have 20%...
-
For each polynomial function, identify its graph from choices AF. (x) = -(x - 2) 2 (x - 5) 2 . A. B. y F. D. E. y y y 2 5 0 2 5
-
When did Artificial Intelligence first begin to be studied? Your answer should be more detailed than a simple date.
-
The following audit report was drafted by a junior staff accountant of Lipske & Griffin, CPAs, at the completion of the audit of Douglas Companys ICFR. The report was submitted to the engagement...
-
Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to...
-
Using License Fees to Make Positive Profit: Suppose you own one of many identical pharmaceudical companies producing a particular drug x. A: Your production process has decreasing returns to scale...
-
Competency 1 - Assessment To complete this assessment, you will create a report comprised of two parts. In Part 1, you will analyze how 2 major economic events influenced supply, demand, and economic...
-
Can the anisotropic scattering be used in interface current method?
-
Why is a lease of personal property commonly treated as a security interest?
-
Why might a creditor choose not to take security for a debt?
-
How can a creditor obtain a security interest in property that the debtor does not yet possess?
-
Distinguish between portfolio (capital) investment and direct investment.
-
The number of letter misprints per page of a book, where 24 pages have been taken at random from this book, is given below. Draw and appropriate control chart and provide interpretation. Page 1 2...
-
Identify the tax issues or problems suggested by the following situations. State each issue as a question. Jennifer did not file a tax return for 2007 because she honestly believed that no tax was...
-
Define and discuss how to calculate a bonds coupon rate, current yield, expected capital gains yield for the current year, yield to maturity (YTM), and yield to call (YTC). What might be some...
-
Athenian Venues Inc. just reported the following selected portion of its financial statements for the end of 2022. Your assistant has already calculated the 2022 end-of-year net operating working...
-
The APV model, the MM model, and the Hamada equation have different formulas for calculating the unlevered cost of equity, r sU . Why is that, and which formula should you use?
-
The following time-series plot and bar graph both present the sales of digital music for the years 20122015. Which of the graphs presents the more accurate picture? Why? Million $ 5000 4800- 5000...
-
The Dow Jones Industrial Average reached its lowest point in recent history on October 9, 2008, when it closed at $8,579. Eight years later, on October 10, 2016, the average had risen to $18,329.04....
-
In 2007, U.S. residents saved approximately $310 billion. In 2015, that amount was $784 billion, about two-and-a-half times greater. Which of the following graphs compares these totals more...
Study smarter with the SolutionInn App