World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts: Wheelrim and Axle 2.50 Merged Firm $2.67 25 A World Enterprises $ 2.00 $ 40 20 100,000 $ 200,000 $ 4,000,000 Earnings per share Price per share Price-earnings ratio Number of shares Total earnings Total market value 10 200,000 $ 500,000 $ 5,000,000 There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough its own shares to ensure its $2.67 earnings per share objective. a. Complete the below table for the merged firm. (Do not round intermediate calculations. Round the price per share to 2 decimal places, the price-earnings ratio to 1 decimal place, and the other answers to the nearest whole number.) World Enterprises $ 2.00 $ 40 20 Earnings per share Price per share Price-earnings ratio Number of shares Total earnings Total market value Wheelrim and Axle $ 2.50 $ 25 10 200,000 $ 500,000 $5,000,000 Merged Firm $2.67 34.33 12.86 262172 700000 9000000 100,000 $ 200,000 $ 4,000,000 b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Exchange ratio .81 c. What is the cost of the merger to World Enterprises? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest whole number.) Cost of merger $ 567,365 d. What is the change in the total market value of the World Enterprises shares that were outstanding before the merger? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number.) Change in share value $ 567,365 World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts: Wheelrim and Axle 2.50 Merged Firm $2.67 25 A World Enterprises $ 2.00 $ 40 20 100,000 $ 200,000 $ 4,000,000 Earnings per share Price per share Price-earnings ratio Number of shares Total earnings Total market value 10 200,000 $ 500,000 $ 5,000,000 There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough its own shares to ensure its $2.67 earnings per share objective. a. Complete the below table for the merged firm. (Do not round intermediate calculations. Round the price per share to 2 decimal places, the price-earnings ratio to 1 decimal place, and the other answers to the nearest whole number.) World Enterprises $ 2.00 $ 40 20 Earnings per share Price per share Price-earnings ratio Number of shares Total earnings Total market value Wheelrim and Axle $ 2.50 $ 25 10 200,000 $ 500,000 $5,000,000 Merged Firm $2.67 34.33 12.86 262172 700000 9000000 100,000 $ 200,000 $ 4,000,000 b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Exchange ratio .81 c. What is the cost of the merger to World Enterprises? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest whole number.) Cost of merger $ 567,365 d. What is the change in the total market value of the World Enterprises shares that were outstanding before the merger? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number.) Change in share value $ 567,365
