Asked by Steven
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: Oxford Corporation is acquiring the target Bickley, Inc. in a merger. Both companies are publicly listed. Bickley's market valuation in the merger is $9.0 billion, and its equity value on its balance sheet before any adjustments is $5.5 billion. During the merger process, Bickley's inventories will be written down by $500 million, and its receivables will be written down by $400 million. On the other hand, under fair value accounting, its plant and equipment will increase in value by $1.0 billion. Its patents and trademarks, however, will decrease in value by $500 million.
A) What is the new equity value of Bickley on its balance sheet?
B) How much goodwill will Oxford enter on its balance sheet as a result of this merger?
C) If the prevailing market value of Bickley was $7.0 billion on the NASDAQ before the merger announcement, what is the premium over market value that Oxford paid for Bickley in dollars and percent?
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: Oxford Corporation is acquiring the target Bickley, Inc. in a merger. Both companies are publicly listed. Bickley's market valuation in the merger is $9.0 billion, and its equity value on its balance sheet before any adjustments is $5.5 billion. During the merger process, Bickley's inventories will be written down by $500 million, and its receivables will be written down by $400 million. On the other hand, under fair value accounting, its plant and equipment will increase in value by $1.0 billion. Its patents and trademarks, however, will decrease in value by $500 million.
A) What is the new equity value of Bickley on its balance sheet?
B) How much goodwill will Oxford enter on its balance sheet as a result of this merger?
C) If the prevailing market value of Bickley was $7.0 billion on the NASDAQ before the merger announcement, what is the premium over market value that Oxford paid for Bickley in dollars and percent?
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Anonymous
• Explain what type of merger this is. JIM distributes its stock and cash to Mason in exchange for all of its assets.
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