Assume that at the time of the below mentioned merger, Microsoft has 7,464 million shares outstanding, and the acquired entity (ATVI) has 2,400 million shares authorized, 1,200 million shares issued and 400 million treasury shares.

Consider the following summarized financial statement information for Microsoft and ATVI.

All numbers are in billions of dollars ($000,000,000).

For this comprehensive analysis, there are multiple parts to one question where it can be assumed that the book value of the acquired assets and liabilities are equal to their market values.

1. How much goodwill will be created on the consolidated financial statements of Microsoft as a result of the acquisition? __________

2. Compute the Debt-to-Asset Ratio (Total Liabilities divided by Total Assets) immediately after the acquisition:

a) For Microsoft, the parent corporation alone: __________

b) For Microsoft, Consolidated: __________

3. Calculate the profit margin (defined as Net Income/Revenues) for the year following the merger.

a) For Microsoft, the parent corporation alone: __________

b) For Microsoft, Consolidated: __________

Transcribed Image Text:

Estimated Balance Sheet as of merger date (before merger) (*) Assets Liabilities Shareholders' Equity Estimated Income Statement for the year after the merger (before any effects of the acquisition) (*) Revenues Expenses Net Income (*) Based on previous annual reports for the two companies. MSFT 365 198 167 198 125 73 ATVI 25 7 18 12/96 3 Estimated Balance Sheet as of merger date (before merger) (*) Assets Liabilities Shareholders' Equity Estimated Income Statement for the year after the merger (before any effects of the acquisition) (*) Revenues Expenses Net Income (*) Based on previous annual reports for the two companies. MSFT 365 198 167 198 125 73 ATVI 25 7 18 12/96 3

Answer rating: 100% (QA)

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