B407F Week 2 Tutorial Question

B407F Week 2 Tutorial Question - B407F Week 2 Tutorial...

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Question 1 X Limited (X) issues ordinary shares to shareholders of Y Limited (Y) in exchange for all of the outstanding ordinary shares of Y. Y’s shareholders will own 50.1% of the voting interests of the combined entity. The board of directors of the combined entity will have 5 former directors of X and 4 former directors of Y. Two-thirds shareholder vote is required for removal of Board members. Senior management will consist of two members from X and one member from Y. Which company will be declared as the acquirer? Question 2 X Limited (X) agrees to purchase Y Limited (Y).The agreement specifies that X will take over management of the operations of Y on January 1, 2010, with any profits or losses of Y accruing to X from that date. Consideration is exchanged on February 15, 2010. When is the acquisition date? Question 3 S Limited (S) agrees to purchase T Limited (T). S will be entitled to $1 million cash if specified earnings before interest and tax (EBIT) achieved during the year ending December 31, 2010 As of acquisition date (January 1, 2010), there is a 50% probability of achieving the EBIT. The fair value of the contingent consideration on January 1, 2010 is $300,000 As of June 30, 2010, the performance of T has improved such that there is now a 90% probability that they will hit the PBIT. The contingent consideration has a fair value of $950,000 as of June 30 2010
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B407F Week 2 Tutorial Question - B407F Week 2 Tutorial...

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