The shareholders of Cawthra Company have voted in favour of a buyout offer from Erindale Corporation. Information about each firm is given here: Cawthra Erindale Price-Earnings Ratio 6.35 12.70 Shares Outstanding 73,000 146,000 Earnings $230,000 $690,000 Cawthra's shareholders will receive one share of Erindale stock for every three shares they hold in Cawthra. a. What will the EPS of Erindale be after the merger? What will the P/E ratio be if the NPV of the acquisition is zero? b. What must Erindale feel is the value of the synergy between these two firms? Explain how your answer can be reconciled with the decision to go ahead with the takeover. Hint: Show how you come up with the value of Cowthra to Erindale and the cost of the acquisition to Erindale. The shareholders of Cawthra Company have voted in favour of a buyout offer from Erindale Corporation. Information about each firm is given here: Cawthra Erindale Price-Earnings Ratio 6.35 12.70 Shares Outstanding 73,000 146,000 Earnings $230,000 $690,000 Cawthra's shareholders will receive one share of Erindale stock for every three shares they hold in Cawthra. a. What will the EPS of Erindale be after the merger? What will the P/E ratio be if the NPV of the acquisition is zero? b. What must Erindale feel is the value of the synergy between these two firms? Explain how your answer can be reconciled with the decision to go ahead with the takeover. Hint: Show how you come up with the value of Cowthra to Erindale and the cost of the acquisition to Erindale