Question
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 Company | Target Company | |||||
Net Income | 10,000,000 | 75,000,000 | 30,000,000 | 105,000,000 | ||
Shs Outstanding | 10,000,000 | a | ||||
EPS | 7.50 | b | ||||
PE | 8 | |||||
Price | 50.00 | 60 | c | |||
Purchase Price | 150,000,000 |
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