Charging Corporation and Sparking Electrical Company - Business of Electrical Components Distribution - Finance Assignment Help

Assignment Task:

The Case

Charging Corporation and Sparking Electrical Company are competitors in the business of electrical components distribution. Sparking is the smaller firm and has attracted the attention of the management of Charging, for Sparking has taken away market share from the larger firm by increasing its sales force over the past few years.  Charging is considering a takeover offer for Sparking and asked you to serve on the acquisition valuation team that will turn into due diligence team if an offer is made and accepted. Given the financial information and proposal assumptions that follows, how would you respond to (a) and (b)?

Assumptions                                                                                                                                                    

1. Sparking would become a wholly owned subsidiary of Charging.         
2. Revenues will continue to grow to 4.3% for the next five years and will level off at 4% thereafter.
3. The cost of goods sold will represent 95% of revenue going forward.              
4. Sales-force layoff will reduce Sales, general and Administration expenses to $22 million next year, with a 2% growth rate going forward.
5. These layoff and other restructuring charges are expected to result in expensed restructuring charges of $30 million, $15 million, and $5 million (respectively) over the three years period.
6. Noncash expenses are expected to remain around $7 million going forward.
7. Interest expense are expected to remain around $11.5 million going forward
8. A tax rate of 31% is assumed going forward.
9. Charging’s cost of equity is 12%
10. Sparking’s current market capitalization is $315.7 million.
11. Charging will offer Sparking a takeover premium of 20% over current market capitalization.                       

QUESTIONS

1. Make your recommendation about whether or not the acquisition should be pursued  
2. Assume that Sparkling has accepted the takeoffer offer from Charging, and that the new subsidiary must now be consolidated within Charging’s financial statement. Taking Sparkling’ most recent balance sheet and a restated market value of assets of $295.6 million, calculate the goodwill that must be booked for this transaction.
3. If Charging’s shares are currently trading at $62.43, then how many shares should Charging offer for every share of Sparking offer for every share of Sparking?

This Finance Assignment has been solved by our Finance Experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.