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In 2021, we had 10M shares outstanding and our stock is trading at $50 We expect our stock to trade at $60, which is an

In 2021, we had 10M shares outstanding and our stock is trading at $50

We expect our stock to trade at $60, which is an 8 times PE multiple in 2022.

Alternatively, we can grow earnings by acquiring the target company for $150,000,000 using our stock at the end on 2021.  Does the merger make sense and maximizes shareholders wealth if the consolidated company continues to trade at a PE multiple of 8 i

Yes - because EPS would grow to $10.50 and at a P/E of 8 the stock would be valued at $84.00

No - because EPS would grow to $6.00 and at a P/E of 8 the stock would be valued at $48.00

Yes - because EPS would grow to $8.08 and at a P/E of 8 the stock would be valued at $64.62

Yes - because EPS would grow to $9.50 and at a P/E of 8 the stock would be valued at $76.00

Not enough information is provided

No - because EPS would grow to $6.92 and at a P/E of 8 the stock would be valued at $55.36


2021 (A)2022 (F)2022 (F)Consolidated
My CompanyTarget Company
Net Income    10,000,000        75,000,000              30,000,000105,000,000
Shs Outstanding        10,000,000a
EPS                    7.50b
PE                          8
Price              50.00                        60c
Purchase Price150,000,000

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