Mergers and Acquisitions
Not what you're looking for?
Fly-By-Night Couriers is analyzing the possible acquisition of Flash-in-the-Pan Restaurants. 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 indefinitely. 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.
1. What is the synergy from the merger?
2. 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.
3. What is the cost to Fly-By-Night of each alternative?
4. What is the NPV to Fly-By-Night of each alternative?
5. Which alternative should Fly-By-Night use?
Purchase this Solution
Solution Summary
The solution explains the calculations relating to mergers and acquisitions.
Solution Preview
1. What is the synergy from the merger?
The synergy will be the present value of the incremental cash flows of the proposed purchase. Since the cash flows are perpetual, this amount is 600,000/.08=7,500,000
2. What is the value of Flash-in-the-Pan to Fly-By-Night?
The value of Flash-in-the-Pan ...
Purchase this Solution
Free BrainMass Quizzes
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.