Determine synergy from the merger

Reference no: EM1362702

Fly-by-night Couriers is analyzing the possible acquisition of Flash-in the pan Restaraunts. Neither firm has debt. The forecasts of Fly-by-night show that the purchase would increase its annual after-tax cash-flow by $600,000 indefinately. The current market value of Flash-in -the-Pan is $20 million. The current market value of Fly-by-night is $35 million. The appropriate discount rate for the incremental cash flows is 8 percent.

a. What is the synergy from the merger?
b. What is the value of Flash-in-the-pan to Fly-by-Night?
Fly-by-night is trying to decide whether it should offer 25 percent of its stock or $15 million in cash to Flash-in-the-Pan.
c. What is the cost to Fly-by-Night of each alternative?
d. What is the NPV to Fly-by-night of each alternative?
e. Which alternative should Fly-by-Night use?

Reference no: EM1362702

Questions Cloud

Establishment of a contingent liability : Provide some example of a situation that requires the establishment of a contingent liability? Why should a company establish a contingent liability? How does the establishment of a contingent liability impact earnings?

Tax treatment legislation on employee disposable income : Explain the impact of tax treatment legislation on employee disposable income and employer profits.

Show employee and management training : Show do you feel that the employees and managers should train side-by-side so employees can feel more at ease knowing it is not all new to them only?

Forensic accounting-ghost employees : The ability to add ghost employees to a company's payroll system is often the result of a breakdown in internal controls. What internal controls prevent an individual from adding fictitious employees to payroll records?

Determine synergy from the merger : Fly-by-night Couriers is analyzing the possible acquisition of Flash-in the pan Restaraunts. Neither firm has debt. The forecasts of Fly-by-night show that the purchase would increase its annual after-tax cash-flow by $600,000 indefinately.

What is the speed of sound in water : A sound wave moving through water has a frequency of 256Hz and a wavelength of 5.77m.What is the speed of sound in water.

Manage the cost of processing orders : Manage the cost of processing orders - How might an operations manager use this information to manage the cost of processing orders?

Explain the similar bonds without a conversion feature : Explain the Similar bonds without a conversion feature returned 10% at the time and The bond is convertible into stock at a price of $35

Emerging trends in accounting : Assume that actual cash inflows turn out to be $91,000 per year. Determine the amount of Mr. Holt's bonus if the original computation of net present value were based on $90,000 versus $70,000.

User Account

All Pages