Question
TWC wants to purchase (or merge with) TMC. TWC is trading for $70/share and TMC for $35/share.Both are all-equity companies, each with 1,000,000 shares outstanding.TWC
TWC wants to purchase (or merge with) TMC. TWC is trading for $70/share and TMC for $35/share.Both are all-equity companies, each with 1,000,000 shares outstanding.TWC has earnings per share of $2.00 and TMC has earnings per share of $3.50.
(a) If the two firms merge, with TWC acquiring TMC for its current market value in an exchange of stock, what will be the post-merger earnings per share?
(b) Then, suppose TWC pays a 30% premium to buy TMC. How many shares of TWC will it take to purchase TMC?Now what will EPS be if TWC pays the 30% premium?
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Personal Finance
Authors: E. Thomas Garman, Raymond E. Forgue
13th edition
1337099759, 978-1337516440, 1337516449, 978-1337099752
