why do you suppose that du pont was willing to pay a substantial premium over the ne 613704

The Du Pont Company, one of the world’s largest chemical companies, provides the following information about a business combination that occurred during 1997 (edited; dollars in millions): Protein Technologies International was purchased on December 1, 1997. PTI is a global supplier of soy proteins and applied technology to the food and paper processing industries. Du Pont common stock shares totaling 22,500,000, with a fair value of $1,297, were issued in this transaction. In addition, related costs of $4 were incurred. For accounting purposes, the acquisition has been treated as a purchase. Based on preliminary estimates that are subject to revision, the purchase price has been allocated as follows: cash, $47; other current assets, $158; noncurrent assets, $897; and liabilities assumed, $301, including $188 of debt.

Required

a. Based on the above information, show how Du Pont’s balance sheet was affected by the acquisition of Protein Technologies. (Assume that Protein Technologies continues in existence as a legally distinct company.)

b. Determine the excess of Du Pont’s purchase price over the fair value of Protein Technologies’ net assets (in other words, the goodwill) implicit in the Protein Technologies acquisition.

c. Why do you suppose that Du pont was willing to pay a substantial premium over the net assets’ fair value in order to acquire protein technologies?

d. Assume that Du Pont prepares a consolidated balance sheet immediately following the acquisition of protein technologies. Show how the balance sheet of Du Pont would differ before and after consolidation.