Question
World Enterprises is determined to report earnings per share of $2.05. It therefore acquires the Wheelrim and Axle Company. You are given the following facts:
World Enterprises is determined to report earnings per share of $2.05. It therefore acquires the Wheelrim and Axle Company. You are given the following facts:
| World Enterprises | Wheelrim and Axle | Merged Firm | |||||||||
| Earnings per share | $ | 1.50 | $ | 2.00 | $2.05 | ||||||
| Price per share | $ | 30.00 | $ | 20.00 | ? | ||||||
| Priceearnings ratio | 20 | 10 | ? | ||||||||
| Number of shares | 110,000 | 200,000 | ? | ||||||||
| Total earnings | $ | 165,000 | $ | 400,000 | ? | ||||||
| Total market value | $ | 3,300,000 | $ | 4,000,000 | ? | ||||||
There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.05 earnings per share objective. Required:
- Complete the below table for the merged firm.
- How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
- What is the cost of the merger to World Enterprises?
- What is the change in the total market value of the World Enterprises shares that were outstanding before the merger?
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Social Finance Shadow Banking During The Global Financial Crisis
Authors: Neil Shenai
1st Edition
3030082318, 978-3030082314
