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please type your answer thanks! Consider two corporations that both have earnings of $5 per share. The first firm, Old World Enterprises, is a mature
please type your answer thanks!
Consider two corporations that both have earnings of $5 per share. The first firm, Old World Enterprises, is a mature company with few growth opportunities. It has 1 million shares that are currently outstanding priced at $60 per share. The second firm, New World Enterprises, is a young company with much more growth opportunities. Consequently, it has a higher value: Although it has the same number of shares outstanding, its stock price is $100 per share. Assume New World acquires Old World using its own stock and the takeover adds no value (a) In a perfect market, what is the value of New World after the acquisition? (2 Marks) (b) At current market prices, how many shares must New World offer to Old World's shareholders in exchange for their shares? (3 Marks) What are New World's earnings per share after the acquisition? (2 Marks) Calculate New World's price-earnings ratio before and after the takeover. (3 Marks) (c) (d)Step by Step Solution
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