Review Case Study:

Lynch$,$ L$.$ J$.$ & Haskins, M$.$E$.(2018).$ "Amazon.com, Inc. buys Whole Foods Market" Darden Business Publishing.

In this assignment, you will give a brief introduction$/$description of the key issues in the case. Be sure to limit your summarization and focus more on the analysis of the key issues. Then, answer the following questions:

Calculate the amount of goodwill that Amazon will record related to the acquisition of Whole Foods

Use Amazon$$s pre$-$acquisition consolidated balance sheet for the second quarter of $2017($June $30,2017)$ presented in case Exhibit $8.$ In addition, use the information pertaining to Whole Foods$$ pre$-$acquisition consolidated balance sheet presented in case Exhibit $9.$ Lastly, use the information regarding the allocation of the purchase price also presented in the case to prepare a pro forma post$-$acquisition consolidated balance sheet. Assume that Amazon finances the entire deal by obtaining debt.

Now assume that Amazon decides to use its available cash for the purchase, rather than obtaining debt financing. How would Amazon$$s pro forma post$-$acquisition consolidated balance sheet differ from the prepared pro forma post$-$acquisition above in question number $2?$

The allocation of the purchase price across different accounts requires that management make estimates and exercise considerable judgment. What are the implications of those resulting allocations on Amazon$$s future earnings?

Now assume that instead of borrowing or using available cash for the acquisition of Whole Foods, that Amazon opted to use shares of its common stock to make the purchase. Consider that the closing price of Amazon$$s stock at $$946\mathrm{.}02$ on August $28,2017,$ which was the acquisition completion date. How would Amazon$$s pro forma post$-$acquisition consolidated balance sheet differ from the prepared pro forma post$-$acquisition above in questions $2$ and $3?$

Lastly, assume that in the first full fiscal year following the acquisition $($fiscal year ending December $31,2018),$ Whole Foods reports preconsolidated revenues of $$18$ billion and a net income of $$275$ million. What would be the effect of Whole Foods on Amazon$$s consolidated net income and EPS?

What are the effects when we assume that Amazon used its available cash to acquire Whole Foods like above in question $3?$

What are the effects when we assume that Amazon used stock to acquire Whole Foods like above in question $5?$

Continue to address question $6,$ and make the following assumptions:

That the remainder of Amazon$$s business is constant. Assume there is no change in Amazon$$s financial statements from $2016.$

That Amazon records an additional $$60$ million $($after$-$tax$)$ in amortization on the acquired intangibles.

That Amazon records an additional $$11$ million $($after$-$tax$)$ in depreciation on the acquired property, plant, and equipment $($PP&E$).$