This workout asks us to state the needed information to fill out the sources and uses of funds table for Halden company Using the information below Assume net debt of Halden company will be refinanced and no cash will be used from the acquirer's balance sheet We start off with some assumptions, we've got the current share price of the target and a premium that the acquirer will pay above this So we can work out the offer price from that We've then got the basic shares outstanding but underneath we see there are some footnotes And the footnotes suggest that we may have some dilution of that basic shares outstanding figure Equity financing will be 50% and then we've got three different types of fees So if we scroll down Near the bottom we've got our uses of funds here and then underneath that our sources of funds The major item for use to calculate is the fully diluted market cap So we're going to start by calculating that and move onto the remaining items In order to get there, I'm going to start with the offer price You'll note, I've already filled in the current share price and share premium from further up the page So my offer price is going to be one plus the 30%, multiplied by the current share price Now I need to work out the number of shares, and we start by looking at the options outstanding And any dilution from restricted stock units Let's go back to those footnotes, those two footnotes Firstly shows from the left hand side, the options outstanding And I can see there are 17,900 and that had an exercise price of 27.39 Just to point to out, these figures are in thousands whereas the other figures are in millions that we're calculating at the bottom The restricted stock units, there were 3,738 at the year end (December 31st) That will create 3,738 shares But for our options, we'll need to calculate how many shares are created. So let's go back down to that So our options outstanding was 17.9, I'm converting the thousands into millions here The options strike price, 27.39 And I'm now going to use the treasury stock method to work out the dilution So I start by taking the options outstanding I'm then going to multiply by (and I'm going to use the MAX function here, make sure it doesn't go negative) The maximum of the offer price, minus the options strike price, all divided by the offer price again Remember I said I want to make sure it didn't go negative, so I want the maximum of that figure and zero Getting me 6.5 Next we can put in the dilution from the restricted stock units. That was from the top right footnote and there were 3,738 My basic shares outstanding I can link to at the top, 340 And my diluted shares outstanding is the sum of the three items above; basic shares dilution from options and from restricted stock units Fantastic! Now I've got the number of shares, I can multiply that by the offer price And that gets me my fully diluted market cap, I can put that straight into our sources and uses We've got our first item So I know one use of funds is to buy the company; the next use is to refinance their net debt If we go up to their balance sheet, we can see that they've got short term borrowings Current portion of long term debt and just off the bottom of the screen, we can see they've go long term debt as well At the very top of the screen, we can see that they had some cash and cash equivalents that we can net off So let's put those figures into our net debt calculation So our long term debt was 1,800 Current portion of long-term debt 300 Short term borrowings was 16.914 And cash and cash equivalents was 892.814 The net debt is the sum of the three debt items minus the cash item So net debt can now go into our uses of funds as well Next up, I need advisory fees and then equity fees and debt fees My advisory fees are going to be a percentage of enterprise value I calculate my enterprise value here being the fully diluted market cap or equity value plus net debt Great! So my advisory fees are going to be 2% of the enterprise value. Go up to the top, find that 2% and there it is And multiply that by the acquisition enterprise value Equity issuance fees, percentages given at the top. It's given as 1% of equity issued We haven't actually calculated the equity issued yet, so let's link to the empty cell (equity issuance) within the total source of funds We'll come back to that in a second Last up, the debt issuance fees. Again given to us up at the top of 150 So my total uses of funds, 16,742.5 Now my sources of funds, equity issuance is a percentage And the assumption is that it's going to be 50% of the equity purchase price So that comes in at 7,521.5 My debt issued is going to be the remainder And we might note, the equity issuance fees have now filled themselves in Fantastic! I've now got equity issued, debt issued was a plug If I sum them up, I find my total sources of funds is 16,817.7, which is exactly the same as the uses of funds