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 |
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Number of shares |
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Earnings per share |
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P/E |
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Price per share |
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Market value of stock |
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