Question
Willow Enterprises is considering the acquisition of Steadfast Corp. in a stock swap transaction. Currently, Willow's stock is selling for $44 per share. AlthoughSteadfast's shares
Willow Enterprises is considering the acquisition of Steadfast Corp. in a stock swap transaction. Currently, Willow's stock is selling for $44 per share. AlthoughSteadfast's shares are currently trading at $34 pershare, thefirm's asking price is $68 per share.
a.If Willow acceptsSteadfast's terms, what is the ratio of exchange?
b.If Steadfast has 28,000 sharesoutstanding, how many new shares must Willow issue to consummate thetransaction?
c.If Willow has 220,000 shares outstanding before theacquisition, and earnings for the merged company are estimated to be $470,000, what is the EPS for the mergedcompany?
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Analysis for Financial Management
Authors: Robert Higgins
11th edition
77861787, 978-0077861780
