3.

Your compary has eamings pet share of 53.96. It has 1.2 milion shares cutstanding, each of ahich has a price of 540 . You are thinking of buying TargetCo, wtich has earmings per share ol $1 32, 1.7 milion shares cutstanding, and a pioo per share of \$21. You will pay for Targekico by issuing new shares. There are no osgectod synergies from the transaction. a. If you pay no premum to buy TargetCo, what wit your earnings per share be after the merger? b. Suppose you otter an exchange ratio such that, at eutrent pre-enouncament share prices for boh fims, the coffer toptesants a 25% premi.m to buy TargerCo. What will your eaminge per share be alter the mesger? c. What explains the change in eamings per share in part (a)? Ave your shaceholders any better of worse off? d. What will your price-earninge ratio be after the merger (il you pay no peemiun)? How does this compare to your Pie ratio befoce the merger? How does this compare to forgetCo's gremerger PEE ratio? a. If you pay no premium to buy TargetCo, what will your earnings per share be affer the merger? The EPS after the merger is 5 (Round to ene nearest cent.) be after the merger? The EPS atter the merger is $ (Round to the nearest cont.) c. What explains the change in earnings per share in part (a)? (Select the best droice beion) A. EPS decines because TarguCe has a higher price-earnings ratio than your fim. 8. EPS always cecine it the fim heves new thares to pey far a merger: C. EP3 dedines becouse you are over - paying for TargetCo. Are your tharehoders any better of worse off? (Select the best chice beicen) A. in this case, your thareholders are batter off. B. In this cate. yosr shaceholsers are reither worse not beter off: c. in this case, your thareholders are worse of faio? The PIL ratio attar the marger a (Revond to wo decimal places?) Your company has eamings per share of $3.96. It has 1.2 millon stares outstanding, eschi of which has a peice of Sto. You sce thinking of buying TargenCo, which has earnirgs per share of $1.32, 1.7 milion shares outstanding, and a price per chare of $21. You will pay for TargetCo by issuing new shares. There are no expoctod synerpios from the transastion. a. If you pay no premium to buy Targe:Co, what will your eamings per thare be aftor the mergen? b. Suppose you offer an exchange rato such thet, at currect pro-announcement share prices for both frms, the offer represents a 25% premiun to buy targetco. What will your eaminga per shate be afler the merger? c. What exglains the change in eamings per ahare in part (a)r Are your thareholiders any bester or worse off? d. What will your prico-camings rato be after the merger (if you pay no premium)? How does this coemparo to your PlE ratio belone the merger? How does this compare to TargatCo's premerger P.E ratio? c. Wrat explains the change in eamngs per share in pan (a)f (beiect ane oest choice bowow) A. EPS decines because TargetCo has a highac price-6aenings raso than yeur firm. B. EPS always decline if the firm istues new shares to pay for a merger. C. EPS declines because you are over - paying for TargotCo. Ave your shareholders any botter or worse off? (Select the bent chaice below.) A. In this case, your sharhholders are bether off. B. In this case, your sharohclders are noither worse nor beter ofl. C. In this caso, your shareholders are worse offl. d. What will your price-eamings ratio be atter the merger (if you pay no premium)? How does this compare to your PIE tafo betoce the merger? How does this cenpure to targeiCois promeriger PiE ratio? The PRE ratio atter the merger is (Round to two decimil places.) How does this compare to TargetCo's premerger P/E ratio? The PIE ratio before the merger was (fround to two docimal places.) TargetCo's premerget P/E ratio was (Round to two decimal places) (Select from the drap-doan menui) Buging TergetCo with stock and creating no synergies, the transactian simply ends-up with a company whose P.I reto is