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vlabodo [156]
3 years ago
5

You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company.​ UnderWater's stock price is $

15 and it has 1.25 million shares outstanding.You believe that if you buy the company and replace its​ management, its value will increase by 35 %. You are planning on doing a leveraged buyout of UnderWater and will offer $ 18.75 per share for control of the company. a. Assuming you get 50 % ​control, what will happen to the price of​ non-tendered shares? b. Given the answer in part ​(a​), will shareholders tender their​ shares, not tender their​ shares, or be​ indifferent? c. What will your gain from the transaction​ be?
Business
1 answer:
sladkih [1.3K]3 years ago
3 0

Answer:

a. The shareholders will want to tender their shares.

c.  The gain will be $25.31 million – $23.44 million = $1.87 million.

Explanation:

a. The value of the firm is 1.25 million shares* 15= $18.75 million.

Increase in value, 18.75*135% = $25.31 million, so now this is the value of the firm

If 50% of the shares are bought for $18.75 Million, you will buy 0.625 million shares, so the total amount that will be paid is $11.72 million.

Now, the money against shares will be borrowed as collateral. This means that the new value of the equity will be $25.31 million – $11.72 million = 13.59 million.

1.25 million shares are there so now the price of the share will be  =  $10.87 million ($13.59 million/$1.25 million = $ 10.87 million).

b.The price of the shares has decreased from $13.59 to $10.87 after the tender offer, everyone will want to tender their shares for $18.75.

c. Supposing everyone tenders the shares and you will buy at $18.75 per share, you will pay $23.44 (18.75 per share *1.25 million shares) to acquire the company and it will be worth $25.31 million.

The gain will be $25.31 million – $23.44 million = $1.87 million.

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A partial list of Waterways' accounts and their balances for the month of November 2016 follows:
lesya [120]

Answer:

Total current assets = $697,750

Explanation:

The partial balance sheet is as follows:

Waterways Corporation

Balance Sheet (Partial)

For the month of November 2016

<u>Details                                                                $                         $          </u>

<u>Current Assets</u>

Cash                                                           260,000

Accounts Receivable                                 275,000

Finished Goods Inventory, November       68,800

Raw Materials Inventory, November          52,700

Prepaid Expenses                                    <u>    41,250  </u>

Total current assets                                                              697,750

Note:

Cash is the most liquid of assets.

Accounts receivable which should be collected within 30 to 60 days are less liquid than cash, but more liquid than inventory.

Finished Goods Inventory which is expected to be sold and converted to cash within one year, and Raw Materials Inventory which is expected to be converted to finished good within one year are more liquid than Prepaid expense.

Therefore, the least liquid among current assets’ item above is the Prepaid Expense as it is cash paid for services not yet received..

4 0
2 years ago
A focused low-cost strategy ...A) cannot be sustained over time unless the focuser is aggressive in entering other segments wher
alexandr1967 [171]

Answer:

The correct answer are A and E.

Explanation:

Cost leadership is where the company intends to be the lowest cost producer in its industrial sector. The company has a broad picture and serves many segments of the industrial sector, and can still operate in related industrial sectors. The breadth of the company is often important for its cost advantage. The sources of cost advantages are varied and depend on the structure of the industrial sector. They can include the persecution of economies of scale of own technology, preferential access to raw materials.

A successful cost leadership strategy is disseminated throughout the company, as evidenced by high efficiency, low overhead, limited benefits, waste intolerance, thorough review of budget requests, extensive control elements, rewards linked to cost concentration and extensive employee participation in attempts to control costs.

Some risks of following cost leadership is that competitors could mimic the strategy, decreasing the profits of the industry in general; that technological advances in the industry could make the strategy ineffective or that the interest of the buyers could be diverted towards other characteristics of differentiation besides the price.

4 0
3 years ago
Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about
alina1380 [7]

Answer:

Annual demand (D) = 1,600 units

Ordering cost per order (Co) = $16

Holding cost per item per annum (H) = $8

EOQ = √2Dco

                H

EOQ = √2 x 1,600 x $16

                    $8

EOQ = 80 units

Explanation:

EOQ is the square root of 2 multiplied by annual demand and ordering cost per order divided by holding cost per item per annum.

5 0
3 years ago
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2021, included the following
77julia77 [94]

Answer:

                  LINDOR CORPORATION  

             Statement of Comprehensive Income  

          For the Year Ended December 31, 2021  

Particulars                                       Amount

Sales revenue                             $2,700,000  

Less: Cost of goods sold          <u>-$1,590,000</u>

Gross margin                              $1,110,000

Less: <u>Operating expenses:</u>  

Selling & administrative exp.    <u>-$431,000</u>

Operating income (EBIT)            $679,000  

<u>Other income (expenses)</u>

Less: Interest expenses             <u>-$59,000</u>

Income before income tax         $620,000  

Less: Income tax expenses      <u>-$155,000</u>

Net income                                 $465,000

Other comprehensive income (net of tax)

Gain on debt securities A         $74,250

Comprehensive income B        $539,250

Earnings per share A/B             $0.24

Calculations of Gain on debt securities, net of tax:

Gain on debt securities before tax     $99,000  

Less: Tax     ($99,000 * 25%)             <u>-$24,750 </u>

Gain on debt securities net of tax $74,250

*Calculation of Earnings per share:

Earnings per share  =  Net income / Number of common shares outstanding  = $465,000 / 1,900,000  

= $0.24 per share

3 0
2 years ago
Operating costs are the opposite of
NeX [460]

Answer:

Variable expenses. I'm not sure

6 0
3 years ago
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