Question
Assume you are the Chief Executive Officer of a publicly traded conglomerate with five separate operating units. Each of these units is in an industrial
Assume you are the Chief Executive Officer of a publicly traded conglomerate with five separate operating units. Each of these units is in an industrial sector of the USA economy, with very limited international business. These operating units consist of automotive parts manufacturing, oil field supply, medical supplies manufacturing, transportation, and agricultural chemical manufacturing. Your company has a market value (i.e. market capitalization) of thirty billion dollars. The companys stock trades at eleven times trailing earnings and twelve times projected earnings, and has a Beta of .95. You are considering the purchase of a smaller publicly traded company that is in high tech. The potential acquisition centers its activity in servicing the cloud. The company has a market value of five billion dollars, and its stock trades at seventy-five times trailing earnings and twenty-five times projected earnings. It has a Beta of 1.73.
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