Hi Guys, Could you please help me to find an answer for the following exercise? Firm with NI=200 holds 100% of a subsidiary. IPO of 30% of the subsidiary for 1bn in cash proceeds and P/E (subsidiary) of 20 Accretion/Dilution (percentage)? Impact on leverage? Thank you

Off the bat, I don't think there is enough information, but with that being said....the company retains majority interest in sub at 70% so non-controlling interest of 30% of the sub will be recorded on the parent's balance sheet. As as result, the Net Income of 200 will remain the same as per the consolidation method of financial statements; however, because the ownership interest is no longer 100%, an adjustment will have to be made for income attributable to non-controlling interest, thus reducing Net Income available to common of parent.

Accretion Dilution exercise

Sk3tchi

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Accretion Dilution exercise

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