FreemanCare Inc, which maintains and runs health maintenance organizations, has a price/book value ratio of 4....
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FreemanCare Inc, which maintains and runs health maintenance organizations, has a price/book value ratio of 4. It plans to merge with NewcombCare Inc, a corporation that owns and runs hospitals, and has a price/book value ratio of 2. Assuming that FreemanCare's equity value is three times that of NewcombCare's equity value, and that the companies adopt pooling to account for the acquisition, estimate the price/book value ratio after the merger. (Pooling essentially earns that the book values of the two firms are added up to arrive at the book value of the combined firm) FreemanCare Inc, which maintains and runs health maintenance organizations, has a price/book value ratio of 4. It plans to merge with NewcombCare Inc, a corporation that owns and runs hospitals, and has a price/book value ratio of 2. Assuming that FreemanCare's equity value is three times that of NewcombCare's equity value, and that the companies adopt pooling to account for the acquisition, estimate the price/book value ratio after the merger. (Pooling essentially earns that the book values of the two firms are added up to arrive at the book value of the combined firm)
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SOLUTION To estimate the pricebook value ratio after the merger we need to calculate the combined equity value and book value of the merged entity Lets assume the equity value of NewcombCare Inc is re... View the full answer
Related Book For
Organizational Change
ISBN: 9781292243436
6th Edition
Authors: Barbara Senior, Stephen Swailes, Colin Carnall
Posted Date:
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