1. A firm has four divisions-food, cookware, retail, and credit services- that generate revenues of $1.5 million, $3.8 million, $5.7 million, and $3.1 million, respectively. Compute the Herfindahl index (HI) for the firm. The firm is considering the purchase of a rival retailer, which would increase the retail division?s revenues by another $3.2 million. The firm is also considering selling its credit services divisions. Assuming these two actions occur, what will the HI become? What is the HI if the sale of the credit division does not occur but the rival is acquired? Mini Case- Mergers, Corporate Control, and Corporate Governance Jackson Enterprise (JE) is offering a 25% takeover premium to Michael Studios, Inc. (MSI) for the firm?s 2 million outstanding shares, which are currently trading for a pre-offer price of $20 per share. The balance sheet for MSI is: Assets Liabilities Current $15,000,000 Current $7,500,000 Food 45,000,000 Long-term 25,000,000 Total 60,000,000 Total 32,000,000 Owner?s Equity $27,500,000 Total liabilities 60,000,000 & equity The market value of MSI?s fixed assets is $60,000,000. The sales (in millions) for the industry by company are: Sales ABC $89 CWC 66 DEF 35 JE 45 KOJ 42 MSI 18 SEE 76 1. Determine the amount Jackson Enterprise is willing tyo pay in terms of goodwill. 2. If JE?s shares are currently trading at $62.43, then how many shares should JE offer for every share of MSR? 3. Assuming that MSI will be treated as a separate reporting subsidiary following the merger, develop the balance sheet for the subsidiary. 4. Calculate the Herfindahl Index for the industry both before and after the proposed merger.
Paper#7003 | Written in 18-Jul-2015Price : $25