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 ABC do?

Transcribed Image Text:

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