ABC Corporation would like to acquire finn XYZ It has offered 300,000 of its shares for the 80,000 outstanding shares of XYZ XYZ finds this offer acceptable The dilution is not acceptable for ABC ABC could issue $3,000,000 of 08 debt The proceeds could buy ABC shares at $10 per share What should AB...

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ABC Corporation would like to acquire finn XYZ. It has offered 300,000 of its shares for the

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ABC Corporation would like to acquire finn XYZ. It has offered 300,000 of its shares for the 80,000 outstanding shares of XYZ.

XYZ finds this offer acceptable.

image text in transcribed

The dilution is not acceptable for ABC.
ABC could issue $3,000,000 of .08 debt. The proceeds could buy ABC shares at $10 per share.
What should ABC do?

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The Capital Structure Decision

ISBN: 9781402072994

1st Edition

Authors: Harold Bierman

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Question Posted: Jun 10, 2024 02:04 AM

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ABC Corporation would like to acquire finn XYZ. It has offered 300,000 of its shares for the

Question:

Earnings ABC $1,000,000 XYZ 200,000 Shares EPS P/E Price Value 1,000,000 80,000 $1.00 10 $10 10,000,000 2.50 15 37.50 3,000,000 1,2000,000 Pro-forma EPS = $.92. 1,300,000

Step by Step Answer:

The Capital Structure Decision

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