Question
Firm A Price per share $100.00 $20.00 Total earnings $650.00 $150.00 Share outstanding 100 40 Total Value $10,000.00 800.00 Suppose Company A will acquire Company
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| Firm A | |||
| Price per share | $100.00 | $20.00 | ||
| Total earnings | $650.00 | $150.00 | ||
| Share outstanding | 100 | 40 | ||
| Total Value | $10,000.00 | 800.00 | ||
Suppose Company A will acquire Company T. Company A will offer two new share of A for every five shares of T.
a. If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger? (sample answer: 27.50) b.Now suppose that the merger really does increase the value of the combined firms by $800, what is the price-earnings ratio of A's stock after the merger? (sample answer: 27.50) c. Now suppose that the merger really does increase the value of the combined firms by $800, What is the final merger premium in dollar does Company A pay to Company T (sample answer: $450.50)
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Financial Accounting IFRS WileyPLUS NextGen Card With Loose Leaf Print Companion Set
Authors: Jerry J. Weygandt ,Paul D. Kimmel ,Donald E. Kieso
4th Edition
1119504708
