Debt common stock 60000 shares paid in capital in

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Unformatted text preview: d customer depositsb Prepaid expenses Total current assets Land 14,000 $4,835,000 $ 415,000 Taxes payable Total current liabilities First mortgagec Net plant 200,000 Second mortgagec Net equipment 350,000 Unsecured bonds Total fixed assets $ 965,000 Total $5,800,000 Total long-term debt Common stock (60,000 shares) Paid-in capital in excess of par Retained earnings Total stockholders’ equity Total aRepresents $2,700,000 1,300,000 120,000 60,000 70,000 $4,250,000 $ 300,000 200,000 400,000 $ 900,000 $ 120,000 480,000 50,000 $ 650,000 $5,800,000 wages of $600 per employee earned within 90 days of filing bankruptcy for 200 of the firm’s employees. bUnsecured cThe customer deposits not exceeding $900 each. first and second mortgages are on the firm’s total fixed assets. The trustee expects to liquidate the assets for $3.2 million—$2.5 million from current assets and $700,000 from fixed assets. Required a. Calculate (1) the ratio of exchange in market price and (2) the earnings per share (EPS) and price/earnings (P/E) ratio for each company on the basis of the data given in the table that accompanies discussion of the acquisition alternative. b. Find the postmerger earnings per share (EPS) for Rome Industries, assuming that it acquires Procras Corporation under the terms given. c. Use the estimated postmerger price/earnings (P/E) ratio and your finding in part b to find the postmerger share price. d. Use your finding in part c to determine how much, if any, the total market value of Rome Industries will change as a result of acquiring Procras Corporation. e. Determine how much each claimant will receive if Procras Corporation is liquidated under the terms given. f. How much, if any, of its $1.9 million balance due from Procras Corporation will Rome Industries recover as a result of liquidation of Procras? CHAPTER 17 Mergers, LBOs, Divestitures, and Business Failure 753 g. Compare your findings in parts d and f, and make a recommendation for Rome Industries with regard to its best action—acquisition of Procras or the liquidation of Procras. h. Which alternative would the shareholders of Procras Corporation prefer? Why? WEB EXERCISE WW W Go to www.uscourts.gov/bankruptcycourts.html, the site of the U.S. Bankruptcy Courts. Click on the link at the bottom for Library. Under Statistical Reports, click on Federal Judicial Caseload Statistic and then on Judicial Business, a statistical report. Find the section on bankruptcy courts and answer the following questions. 1. Summarize recent trends in number of bankruptcy cases filed and in Chapter 7 filings. 2. Compare business and nonbusiness bankruptcy trends. Go to www.moeb.uscourts.gov, the site for the Eastern District of Missouri Bankruptcy Court. Click on Statistics, and then, under the pull-down menu for Data tables, select Annual Filings. 3. Which year had the greatest number of filings in this district? What is the general trend? 4. Under which chapter were there the greatest number of filings? Remember to check the book’s Web site at www.aw.com/gitman for additional resources, including additional Web exercises....
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