Question
ABC Inc is considering a takeover of DEF Inc. You have gathered the following information regarding the two companies. ABC Inc DEF Inc Price Earnings
ABC Inc is considering a takeover of DEF Inc. You have gathered the following information regarding the two companies.
|
| ABC Inc | DEF Inc |
| Price Earnings (P/E) Ratio | 20 | 10 |
| Shares outstanding | 2,000,000 | 1,000,000 |
| Earnings | 4,000,000 | 1,000,000 |
1.Assuming that ABC Inc offers to pay $12 per share in cash, for each share of DEF Inc and assuming that the synergies are $1,000,000 in total (NOT annually). What is the NPV of the transaction for ABC Inc?
2.What will be the Price per share after the transaction is completed?
3.What will be the price/earnings ratio after the transaction is completed, assuming the market correctly analyzes the transaction?
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Victorian Literature And Finance
Authors: Francis O'Gorman
1st Edition
0199281920, 978-0199281923
