Question
Consider the following premerger information about Firm A and Firm B: Firm A Firm B Total earnings $ 1,600 $ 800 Shares outstanding 1,100 300
Consider the following premerger information about Firm A and Firm B:
Firm A | Firm B | |||||
Total earnings | $ | 1,600 | $ | 800 | ||
Shares outstanding | 1,100 | 300 | ||||
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 A and 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 $ 1.66 - I have this answer 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 priceearnings 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 priceearnings 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.) Priceearnings times d-1. If there are no synergy gains, what will the share price of 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-2. If there are no synergy gains, what will the priceearnings ratio be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Priceearnings times
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