Adjustments made to the pro forma income statement
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Acquirer purchases 100% of target by issuing $100 million in new debt to purchase target shares, carrying an interest rate of 10%.
Excess cash is used to help pay for the acquisition.
Acquirer expects to be able to close down several of the target company's old manufacturing facilities and save an estimated $2 million in the first year.
Target PP&E is written up by $25 million to fair market value.
Investment bankers, accountants, and consultants on the deal earned $30 million in fees.
Which of the following adjustments would be made to the pro forma income statement?
1. Advisory fee expense of $30 million
2. Reduction to depreciation expense
3. After-tax synergies of $2 million
4. None of the above
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The pro-forma is a forecast of the revised income statement into the future. So, the question is ...
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