Question
Big Scope Inc. has 7 million shares outstanding, a share price of $64 and earnings per share of $4. The company wants to buy Little
Big Scope Inc. has 7 million shares outstanding, a share price of $64 and earnings per share of $4. The company wants to buy Little Scope Inc., which has 4 million shares outstanding, a share price of $24 and earnings per share of $2.
Big Scope is going to pay for the acquisition by issuing new shares, and there are no transactions costs or expected synergies.
How many new shares must Big Scope issue to pay for the takeover if there's no acquisition premium (in million)?
What will be earnings per share after the merger if there is no acquisition premium?
What is the change in the P/E ratio of Big Scope (value, not percent)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started