Corporate Finance:. "Goliath" is a family owned business...

Corporate Finance:

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"Goliath" is a family owned business which is going to purchase "David". Goliath is trying to decide whether to purchase David using all stock as acquisition currency or all debt (the total purchase price will be the same either way). If they were to use all stock, Goliath would need to issue 98 million new shares to David's shareholders. Alternatively, Goliath believes it could get a bank loan for the entire purchase price at an interest rate of 2.7%. Additional information is summarized below. Assume no accounting impact or transaction costs. Buyer Target EBIT $219,205,000 $35,782.000 Interest $0 Tax Rate 34.0% 34.0% Buyer Stock Price $12.54 Buyer Shares Outstanding (Pre-Deal) 495,000,000 Buyer Family Ownership (Pre-Deal) 61.0% A. If Goliath uses stock to purchase the David, what would Goliath's family ownership of the combined company be? Please show your work and round the percentage to at least two decimal places. B. How much Pro Forma Net Income would be "owned" by Goliath's controlling family under each financing scenario? Please show your work and provide a precise net income amount.

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