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Please solve the below including the formula in excel Consider the following information for two all-equity firms, A and B: Firm A Firm B Total
Please solve the below including the formula in excel
Consider the following information for two all-equity firms, A and B: | |||||||
Firm A | Firm B | ||||||
Total earnings | $3,000 | $1,100 | |||||
Shares outstanding | 600 | 400 | |||||
Price per share | $70 | $15 | |||||
Firm A is acquiring Firm B by exchanging 100 of its new shares for all the shares in B. | |||||||
1. What is the cost of the merger if the merged firm is worth $63,000? (the number of shares of the merged firm is 600 + 100 =700 shares) | |||||||
2. What will happen to the Merged Firm's Earning Per Share (EPS)? | |||||||
3. What will happen to the Merged Firm's Price Earnings Ratio (PER)? | |||||||
Answers | |||||||
1/ | |||||||
Value of Merged firm | |||||||
# of share of Merged firm | |||||||
Value of share of Merged Firm | |||||||
# of Exchanged shares | |||||||
Cost of the merger | |||||||
2/ | |||||||
Earning Firm A | |||||||
Earning Firm B | |||||||
Total Earning | |||||||
# of share of Merged firm | |||||||
EPS | |||||||
3/ | |||||||
Value of share of Merged Firm | |||||||
EPS | |||||||
PER |
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