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Problem 2 60% Debt Pro-Forma NewCo Target Buyer Mkt Value 2018/121312018/12131 500,000 9,000,000 Book Value Mkt Value Book Value 2018/12/31 2018/12131 50,000 2,500,000 Current Assets PP&E Goodwil Other Assets 50,000 500,000 2,000,000 8,000,000 200,000 200,000 2,750,000 50,000 1,200,000 1,500,000 2,750,000 800,000 750,000 9,300,00010,250,000 100,000 4,100,000 6,050,000 10,250,000 Total Assets 2,250,000 50,000 1,000,000 1,200,000 2,250,000 Accts Payable Long-Term Debt Equity Total Liabilities and Equit 100,000 4,000,000 5,200,000 9,300,000 2019E EPS 1.00 3.00 Shares Outst 100,000 75,000 Price/Share P/E Multiple 22.00 22x 60.00 20x 45.5% 70% 60.0% Debt/Capital Interest Rate on Debt Percent Debt 43.5% Tax Rate for both 20.0% I. Assume Buyer is acquiring Target, financed with 60% debt and 40% stock. The stock prices shown above are the prices involved (i.e., the buyer's stock at time of deal is $60 and they are paying $22/share for the target) The deal is closing on 12/31/18. Interest rate and tax rate assumptions are shown above Shares outstanding and 2019 Estimated standalone EPS are given above Calculate the 2019E EPS of the combined entity. Assume zero synergies EPS 2. What amount of pre-tax synergies are required to make the combined EPS break-even? If the deal is already break-even or accretive, you can answer "n/a." 2. What amount of pre-tax synergies are required to make the combined EPS break-even? If the deal is already break-even or accretive, you can answer "n/a." Pre-Tax to Breakeven 3. Fill in the combined pro-forma Balance sheet at 12/31/18 for the new Buyer company Include the new numb of Buyer shares outstanding after the close See Above Red Boxes 4. Fill in the boxes for the cash portion per share and the exchange ratio of the deal (red boxes): You would say this deal is structured as Cash, plus shares of Buyer per share of Target 5. What is the Pro Forma Debt/Capitalization Ratio for NewCo? 6. What percentage of NewCo does Buyer control? 7, What is the "100% Exchange Ratio" as Harding terms it? Problem 2 60% Debt Pro-Forma NewCo Target Buyer Mkt Value 2018/121312018/12131 500,000 9,000,000 Book Value Mkt Value Book Value 2018/12/31 2018/12131 50,000 2,500,000 Current Assets PP&E Goodwil Other Assets 50,000 500,000 2,000,000 8,000,000 200,000 200,000 2,750,000 50,000 1,200,000 1,500,000 2,750,000 800,000 750,000 9,300,00010,250,000 100,000 4,100,000 6,050,000 10,250,000 Total Assets 2,250,000 50,000 1,000,000 1,200,000 2,250,000 Accts Payable Long-Term Debt Equity Total Liabilities and Equit 100,000 4,000,000 5,200,000 9,300,000 2019E EPS 1.00 3.00 Shares Outst 100,000 75,000 Price/Share P/E Multiple 22.00 22x 60.00 20x 45.5% 70% 60.0% Debt/Capital Interest Rate on Debt Percent Debt 43.5% Tax Rate for both 20.0% I. Assume Buyer is acquiring Target, financed with 60% debt and 40% stock. The stock prices shown above are the prices involved (i.e., the buyer's stock at time of deal is $60 and they are paying $22/share for the target) The deal is closing on 12/31/18. Interest rate and tax rate assumptions are shown above Shares outstanding and 2019 Estimated standalone EPS are given above Calculate the 2019E EPS of the combined entity. Assume zero synergies EPS 2. What amount of pre-tax synergies are required to make the combined EPS break-even? If the deal is already break-even or accretive, you can answer "n/a." 2. What amount of pre-tax synergies are required to make the combined EPS break-even? If the deal is already break-even or accretive, you can answer "n/a." Pre-Tax to Breakeven 3. Fill in the combined pro-forma Balance sheet at 12/31/18 for the new Buyer company Include the new numb of Buyer shares outstanding after the close See Above Red Boxes 4. Fill in the boxes for the cash portion per share and the exchange ratio of the deal (red boxes): You would say this deal is structured as Cash, plus shares of Buyer per share of Target 5. What is the Pro Forma Debt/Capitalization Ratio for NewCo? 6. What percentage of NewCo does Buyer control? 7, What is the "100% Exchange Ratio" as Harding terms it

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