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Hi, how to do this question? Suppose Company A is taking over company B, and plays the PE game to justify its deal Company A
Hi, how to do this question?
Suppose Company A is taking over company B, and plays the PE game to justify its deal Company A pays with its own shares worth 50 each, and pays a premium of 30% over the share price of 25 of company B. Given the other relevant figures displayed below, which amount is closest to the earnings per share of the combined company according to the P/E game logic? Note that did not provide the shares outstanding and EPS of the combined firm as that would give away too much information. You might need to calculate these values first. Buyer A Target B Combined Price/earnings ratio (P/E) 10 5 10 Net income 50 million 50 million 100 million Shares outstanding 10 million 10 million Earnings per share (EPS) 5 5 Market value per share 50 25 ? A) 25 B) 50 C) 60.61 D) 66.67 E) 75Step by Step Solution
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