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As a financial analyst at Bank of America, you are analyzing the impact of the merger and acquisition on a company's financial performance. You collected
As a financial analyst at Bank of America, you are analyzing the impact of the merger and acquisition on a company's financial performance. You collected the following data. Price per share Total earnings Share outstanding Total Value Firm A $70.00 $700.00 $200.00 $14,000.00 Firm B $15.00 $100.00 $80.00 $1,200.00 Suppose Company A will acquire Company T. Company A will offer three new share of A for every four shares of T. a. If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger? (sample answer: 27.50) Now suppose that the merger really does increase the value of the combined firm by $5000, please answer part b, c, and d b. what is the price-earnings ratio of A's stock after the merger? (sample answer: 27.50) C. what is the final merger premium in dollar does Company A pay to Company T (sample answer: $450.50) d. what is the initial merger premium promised in dollar does Company A pay to Company T (sample answer: $450.50)
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