Question

The balance sheets of a bidder and target companies are as follows:


The tax rate for both companies is 25 percent. The acquisition will be accounted for using the purchase method. Prior to the acquisition, the bidding firm had 10,000 shares outstanding, with a share price of $20. The target had 5,000 shares outstanding, with a market price of $10.
The bidder acquired the target by offering 0.80 bidder shares per target share.
After analyzing the target, the bidder has decided that the market value of the target’s assets is $65,000, and the market value of the bidder’s assets is $45,000.
a. How many shares will be outstanding for the combined firm, B-T?
b. What fraction of the combined company will be owned by the original bidder shareholders?
c. How much goodwill was created by this transaction?
d. How much is the net tangible assets for the combined firm?
e. Show the consolidated balance sheet for B-T (use the templateprovided).


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  • CreatedFebruary 25, 2015
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