Apple plans to acquire Tesla in a stock-for-stock deal with Tesla receiving $71.30 for each share of its

common stock. Apple expects no change to its P/E multiple post-closing.

Pre Deal Facts

Apple

$55,200

Tesla

$299,000

Net Earnings

Available for

Common

16,000

110,000

Shares

Outstanding

58.25$

65$

Market Price

Per Share

Required:

Compute the exchange ratio.

Compute the share price premium.

Compute the New EPS of the combined company.

Compute the New Share Price of the combined company (assume existing P/E ratio)

Compute the maximum price per share Apple should be willing pay for the Tesla.

Briefly advise (discuss) on the M&A deal (is this a good deal).

Assume Tesla agrees to an all cash purchase for $71.30 a share. Briefly advise and discuss on M&A deal (is this a good deal, show your EPS calculations)

Briefly discuss how a share exchange offer differs from a cash offer.