User Account

All Pages

What is incremental value of the acquisition to Dumb Jack

Assignment Help Financial Accounting
Reference no: EM133051636

Question - Dumb Jack Ltd. is considering making an offer to acquire Smart Smith Ltd. Before the announcement, Dumb Jack has a market value of $6 million and its shares are trading at $40 per share. Smart Smith has 50,000 shares outstanding with a share price of $15. Smart Smith can be acquired for $22 per share in cash or by exchange of stocks wherein Dumb Jack offers one of its m for every two of Smart Smith's shares. The value of Smart Smith to Dumb Jack is expected to be $1.6 million.

(a) What is the incremental value of the acquisition to Dumb Jack?

(b) Should Dumb Jack make a cash offer or a stock offer? Show all necessary calculations.

(c) Suppose the market currently estimates a 60 percent probability that Dumb Jack will go ahead with the acquisition with a stock offer. What will the market value of Dumb Jack be immediately after the announcement of the acquisition?

(d) At what exchange ratio of Dumb Jack shares to Smart Smith shares, would the shareholders in Smart Smith be indifferent between a stock offer and the cash offer? You don't need to consider the probability of acquisition in this part.

Reference no: EM133051636

Questions Cloud

Consequences of new communication technologies : Why is it that technologies like social network websites are used for anti-social purposes?
Motivation to increase current wireless security model : It was corrupted by an attacker, and what you might lose. Would this be motivation to increase your current wireless security model?
Contrast between express and implied contracts : 1. Explain how the independent brokerage system works to distribute insurance.
Calculate the indirect activity cost rate : Proxi Analytics Ltd manufactures two types of sensors - Proximity and Reflex. During 2021, 150 Proximity and 100 Reflex sensors were manufactured.
What is incremental value of the acquisition to Dumb Jack : The value of Smart Smith to Dumb Jack is expected to be $1.6 million. What is the incremental value of the acquisition to Dumb Jack
Creating secure environment : There are several security frameworks and architectures available to use as templates for creating a secure environment.
Seven types of layout outlined on chapter nine : Types of Layout: List and discussed seven types of layout outlined on chapter nine.
Draw a data model with entity names : Each building in an organization has a different name and address. The meeting rooms in each building have their own room number in the building. Each room has
Compare Microsoft Azure with Amazon Web Services : As cloud computing increases in popularity, enhanced features are continually being added. Compare Microsoft Azure with Amazon Web Services (AWS).

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd