9. Merger gains and costs (S32.4) As financial manager of Corton Inc., you are investigating a possible
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9. Merger gains and costs (S32.4) As financial manager of Corton Inc., you are investigating a possible acquisition of Denham Lathes. You have the basic data given in the following table. You estimate that investors expect a steady growth of about 6% in Denham’s earnings and dividends. Under new management, this growth rate would be increased to 8% per year without the need for additional capital.
Corton Denham Forecast earnings per share $5.00 $1.50 Forecast dividend per share $3.00 $0.80 Number of shares 1,000,000 600,000 Stock price $90 $20
a. What is the gain from the acquisition?
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Related Book For
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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