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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

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