$3.$ Perform ratio analysis. Compute earnings per share, current ratio, and return on average stockholders' equity for

$($i$)$ the $2024$ projected financial statements of Sun Company without acquisition as given in the question; and

$($ii$)$ the consolidated financial statements contained in the pro forma consolidation worksheet prepared in requirement #$2$ of Phase I.

Sun Company is contemplating a tender offer to acquire $80\%$ of Moon Corporation's common stock. Moon's shares are currently quoted on the New York Stock Exchange at $$25$ per share. In order to have a reasonable chance of the tender offer attracting $80\%$ of Moon's stock, Sun believes it will have to offer at least $$30$ per share. If the tender offer is made and is successful, the purchase will be consummated on January $1,2024.$ Michael Jackson, the chairperson of Sun's acquisitions committee, has provided you with the projected $2024$ financial statements for Sun Company without the proposed acquisition and the $2024$ Projected Financial Statements of the Moon Company in the table below.

Sun Company's Projected Financial Statements for $2024$ Without Acquisition and Moon Company's Projected Financial Statements for $2024$

Sun $2024$ Projected Financial Statements Without Acquisition Moon $2024$ Projected Financial Statements

Sales $$275,000$ $$35,000$

Cost of goods sold $(174,000)(18,500)$

Operating expenses $(82,000)(4,500)$

Income before taxes $18,60012,000$

Income tax expense $(7,440)(3,600)$

Net income $11,1608,400$

Retained earnings, January $111,6604,800$

Add: net income $11,1608,400$

Less: dividends $(5,000)(1,500)$

Retained earnings, December $3117,82011,700$

Cash $20,1707,500$

Accounts receivable $13,7754,300$

Inventory $12,8754,000$

Property, plant, and equipment $228,00050,000$

Accumulated depreciation $(176,000)(9,000)$

Total assets $98,22056,800$

Sun $2024$ Projected Financial Statements Without Acquisition Moon $2024$ Projected Financial Statements

Accounts payable $13,4007,000$

Common stock$*65,00030,000$

Paid$-$in capital in excess of par $2,0008,100$

Retained earnings $17,82011,700$

Total liabilities and stockholders' equity $284,200229,500$

$*$ Parent: $$12\mathrm{.}50$ par; Subsidiary: $$75$ par $98,22056,800$

Additional Information

As of January $1,2024,$ all of Moon Company's assets and liabilities are fairly valued except for machinery with a book value of $$5,000,$ an estimated fair value of $$6,000,$ and a $5-$year remaining useful life. Assume that straight$-$line depreciation is used to amortize any revaluation increment.

No transactions between these companies occurred prior to $2024.$ Regardless of whether they combine, Sun Company plans to buy $$15,000$ of merchandise from Moon Company in $2024$ and will have $$1,200$ of these purchases remaining in inventory on December $31,2024.$ In addition, Moon is expected to buy $$900$ of merchandise from Sun in $2024$ and to have $$150$ of these purchases in inventory on December $31,2024.$ Sun and Moon price their products to yield a $20\%$ and $25\%$ markup on cost$,$ respectively.

Sun Company intends to use three financial yardsticks to determine the financial attractiveness of the combination. First, Sun wishes to acquire Moon only if $2024$ consolidated earnings per share will be at least as high as the earnings per share Sun would report if no combination takes place. Second, Sun will consider the proposed combination unattractive if it will cause the consolidated current ratio to fall below two to one. Third, return on average stockholders' equity must remain above $20\%$ for the combined entity. If the financial yardsticks described above and the nonfinancial aspects of the combination are appealing, then the tender offer will be made. On the other hand, if these objectives are not met, the acquisition will either be restructured or abandoned