[ivanovrita86]

So how did you guys calculate the gain to shareholders from share for share exchange? How many shares for how many? And the equity gain in the very first question?

[ivanovrita86]

Yes… couldn’t even start. Didn’t see anything like this in previous exams.

[ivanovrita86]

Yes, totally. Nothing about combined company, no share to share details… couldn’t even start. Hope for the rest and the theoretical part of the first question…

[ivanovrita86]

The acquisition question was hard. It was the topic I was best in when practicing, but was the worst in the exam.

[ivanovrita86]

I meant “it was correct”, sorry

[ivanovrita86]

Dear John,

Never mind… I was correct, sorry. Just getting nervous just before the exam

[ivanovrita86]

Ok, thank you so much for your help, John!

Best regards,
Margarita

[ivanovrita86]

Ok, thanks a lot.
The combined P/E ratio is calculated by Kerrin’s P/E ratio x 1.1 (increase of P/E ratio by 10% if the acquisition proceeds). How do we calculate the combined P/E ratio if no increase or change in P/E ratio is mentioned if the acquisition proceeds? Would it simply be the P/E ratio of the acquirer?

Thanks again for your great help!
Best regards,
Margarita

[ivanovrita86]

Dear John,

Thank you so much for your detailed response, I really appreciate it!
Just a short question: How do we know the value of the combined company of 5,961.7 to be able to calculate the value of Kerrin of 4,041.2?

Thanks,
Margarita

[ivanovrita86]

Hello John again,

And why can we not just calculate as follows:
1) Total market value of Kerrin
2) Total market value of Danton
3) Combined market value including 20.5m USD synergies
4) Total number of shares in the combined company
5) New share price of the combined company (result from 3) divided by result from 4))
6) New share price from 5) divided by Danton’s share price to find out how many share Danton’s shareholders should be given

I am not getting the same result as you though, so I guess this approach is not correct?
I am completely confused with share for share exchange, very sorry.

Thank you so much!

[ivanovrita86]

Hello John,

Similarly I am not quite clear how you calculated Kerrin’s new value of its shares of 4041.2?

Thanks a lot!
Margarita

[ivanovrita86]

Hi John,

Thank you so much for your response!

Best regards,
Margarita

[ivanovrita86]

Dear John,

And another question regarding Swap arrangement of Lurgshall Co.
If the text does not mention whether a company wants to borrow fixed or floating and just says that the company and the counterparty can borrow at certain interest rates, how should we know what OWN borrowing should be of the company and the counterparty?

Thanks again!

[ivanovrita86]

I found already the answer, no need to respond anymore! Thank you!

[ivanovrita86]

Dear John,

Thank you so much for your explanation.
Yes, I did watch the free lectures, but was still confused.

Thanks again!

Best regards,
Margarita

[ivanovrita86]

Thank you so much, John!

Margarita

[ivanovrita86]

Hello John,

Thank you so much for the detailed response! I really appreciate it!
Now it makes sense 🙂

Best regards,
Margarita

[ivanovrita86]

Oh, that’s right. It’s the buying and selling YEN rate. I guess it was late… 🙂

Thanks a lot, John!

Best regards,
Margarita

[ivanovrita86]

Ok, thanks a lot! 🙂

[ivanovrita86]

Ok, great! Thank you, John!

[ivanovrita86]

Thank you so much, John! That’s a great help!

[ivanovrita86]

Thanks a lot, John!
And another question in this context… It’s understandable why depreciation on non-current assets has to be added back as it is a non-cash item. But I thought that tax deductible depreciation is a tax allowance so to say, which reduces the profits and therefore taxes to be paid. But in this case I would have more cash in total. So why is the tax deductible depreciation a non-cash item and has to be added back? Aren’t these two different things?

Thanks for clarification!

Best regards,
Margarita

[ivanovrita86]

Dear John,

Yes, by CC I mean contract currency, sorry for the confusion.
And thanks a lot for your quick response and clarification!

Margarita

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