The shares of Amalgamator and Consolidator are both trading at multiples of 2.5 times book value per
Question:
The shares of Amalgamator and Consolidator are both trading at multiples of 2.5 times book value per share. Shareholders’ equity is $200 million at Amalgamator and $60 million at Consolidator. Amalgamator uses stock held in its treasury to acquire consolidator for $263 million. Prior to the acquisition, Amalgamator’s ratio of total assets to total liabilities is 1.25 times, while the comparable figure for Consolidator is 1.18 times.
QUESTIONS:
1.) By paying a premium to Consolidator’s tangible asset value, how much goodwill does Amalgamator create (in millions of dollars)?
2.) What is the total-assets-to-total-liabilities ratio of the combined company?
3.) What's the ratio of tangible assets to total liabilities of the combined company?
Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry