Question
EPS and postmerger priceData for Henry Company and Mayer Services are given in the following table, Earnings available for common stock 260,000 85,000 Number of
EPS and postmerger priceData for Henry Company and Mayer Services are given in the following table, Earnings available for common stock 260,000 85,000 Number of shares of common stock outstanding 105,000 25,000 Market price per share 44 71. Henry Company is considering merging with Mayer by swapping 1.33 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. a.Calculate the ratio of exchange in market price. b.Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company. c.Calculate the price/earnings (P/E) ratio used to purchase Mayer Services. d.Calculate the post-merger earnings per share (EPS) for Henry Company. e. Calculate the expected market price per share of the merged firm.
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