Topic: Illiquidity, Synergy, Control, Book Value, Sound Value, Liquidation Value, Income Approach, and Forex Translation

1.

ABC Corporation would like translate the financial statements of its subsidiary independently operating in the United States. This subsidiary reported the following for the year ending 2020. Cash 2,000.00 Other Current Assets 8,000.00 Noncurrent Assets 15,000.00 Total Assets S 25,000.00 Accounts Payable S 4,000.00 Loan Payable 6,000.00 Ordinary Share Capital 12,000.00 Retained Earnings 3,000.00 Total Liabilities and Equity S 25,000.00 Other information are as follows: The average exchange rate for the year is P55.23. The closing spot rate as of Dec. 31, 2020 is P55.48. The exchange rate on the share issuance date was P51.47. As of Dec. 31, 2019, the retained earnings had a book value of P980 and a translated value of P46,000. Income for the period totaled $3,020. Dividends amounting to $1,000 was declared and paid when the spot rate was P55.72 How much is the translation gain to be reported in the equity portion of the subsidiary?ABC Corporation will be acquiring XYZ Corporation. The latter's fair value has not yet been determined. ABC would be valuing it using relative valuation based on three of its competitors using the price earnings ratio. Relevant information are as follows: Red Inc. Blue Companv Yellow Corp. Equity Market Value 9' 3,000,000.00 9' 2,500,000.00 P 2,800,000.00 Earnings 460,000.00 330,000.00 410,000.00 ABC foresees that upon the acquisition, XYZ will increase its current annual earnings of P360000 by 25%. What is the value of control over XYZ from the point of view of ABC