Calculating the premium paid over market value in merger

Assignment Help Financial Management

Reference no: EM131825236

Fair value determination of goodwill and calculating the premium paid over market value in a merger: Using fair value accounting for goodwill, under FAS 141R, determine the amount of goodwill that "the acquiring company" enters on its balance sheet in the following situation: Talmadge Corporation is acquiring the target Tyler, Inc. in a merger. Both companies are publicly listed. Tyler's market valuation in the merger is $6.0 billion, and its equity value on its balance sheet before any adjustments is $3.0 billion. During the merger process, Tyler's inventories will be written down by $200 million, and its receivables will be written down by $300 million. On the other hand, under fair value accounting, its plant and equipment will increase in value by $700 million, and its patents and trademarks will increase in value by $300 million.

A) What is the new equity value of Tyler on its balance sheet?

B) How much goodwill will Talmadge enter on its balance sheet as a result of this merger?

C) If the prevailing market value of Tyler was $5.0 billion on the NASDAQ during the three months before the merger announcement, what is the premium over market value that Talmadge paid for Tyler in dollars and percent?

Reference no: EM131825236

Questions Cloud

Characteristic of hybrid security : Hybrid securities are quite susceptible to being reclassified as stock. Which of the following might be a characteristic of a hybrid security?

Determine the theoretical futures price : Determine the theoretical futures price ($ per ounce) for the January 2018 Platinum futures contract using procedures discussed in class.

What is the present value of each alternative : What is the present value of each alternative and which option would you recommend?

Firm amount of cash from an increase : With a tax rate of 40%, what is the impact on NI and a firm’s amount of cash from an increase of $200 in COGS?

Calculating the premium paid over market value in merger : Fair value determination of goodwill and calculating the premium paid over market value in a merger. What is the new equity value of Tyler on its balance sheet?

Disadvantages of state regulation of tender offers-mergers : List three disadvantages of state regulation of tender offers and mergers.

How can horizontal merger produce synergy benefits : Define a horizontal merger. How can a horizontal merger produce synergy benefits?

What is lower bound of european foreign currency call : What is the lower bound of a European foreign currency call if the spot rate is $2.25, the domestic interest rate is 5.5 percent,

Find the value of european put option on futures : Find the value of a European put option on futures if the futures price is 72, the exercise price is 70,

User Account

All Pages