Consider the following premerger information about Firm A and Firm B: Firm A Firm B Total earnings $4,350 $1,300 Shares outstanding 1,600 400 Price per share $ 43 $ 47 Assume that Firm A acquires Firm B via an exchange of stock at a price of $49 for each share of B's stock. Both Firm A and Firm B have no debt outstanding. a. What will the earnings per share (EPS) of Firm A be after the merger? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) EPS b. What will Firm A's price per share be after the merger if the market incorrectly analyzes this reported earnings growth (that is, the price-earnings ratio does not change)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price per share c. What will the price-earnings ratio of the postmerger firm be if the market correctly analyzes the transaction? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price-earnings times d-1 If there are no synergy gains, what will the share price of Firm A be after the merger? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price per share d-2What will the price-earnings ratio be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price-earnings times d-3What does your answer for the share price tell you about the amount Firm A bid for Firm B? Was it too high? Too low? Too high Too low Consider the following premerger information about Firm A and Firm B: Firm A Firm B Total earnings $4,350 $1,300 Shares outstanding 1,600 400 Price per share $ 43 $ 47 Assume that Firm A acquires Firm B via an exchange of stock at a price of $49 for each share of B's stock. Both Firm A and Firm B have no debt outstanding. a. What will the earnings per share (EPS) of Firm A be after the merger? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) EPS b. What will Firm A's price per share be after the merger if the market incorrectly analyzes this reported earnings growth (that is, the price-earnings ratio does not change)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price per share c. What will the price-earnings ratio of the postmerger firm be if the market correctly analyzes the transaction? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price-earnings times d-1 If there are no synergy gains, what will the share price of Firm A be after the merger? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price per share d-2What will the price-earnings ratio be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Price-earnings times d-3What does your answer for the share price tell you about the amount Firm A bid for Firm B? Was it too high? Too low? Too high Too low
