Question
In the following merger complete the Bootstrapping Earnings by calculating the missing numbers: Assumptions are: Exchange ratio: One share of Company One for three shares
In the following merger complete the Bootstrapping Earnings by calculating the missing numbers:
Assumptions are:
Exchange ratio: One share of Company One for three shares of Company Two
Market applies pre-merger P/E of Company two to post-merger earnings.
| Company One | Company Two | Company One Post-merger | |||
| Earnings | $120 million | ??? | $180 million | ||
| Number of shares | 100 million | 60 million | ??? | ||
| Earnings per share | $1.2 | $1 | ??? | ||
| P/E | 20 | 10 | ??? | ||
| Price per share | ??? | $10 | ??? | ||
| Market value of stock | ??? | $600 million | ??? |
Answer:
| Company One | Company Two | Company One Post-merger | |||
| Earnings |
|
|
|
|
|
| Number of shares |
|
|
|
|
|
| Earnings per share |
|
|
|
|
|
| P/E |
|
|
|
|
|
| Price per share |
|
|
|
|
|
| Market value of stock |
|
|
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started