Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
Your company has eamings per share of $5. It has 1 milion shares outstanding, each of which has a price of 535 . You are
Your company has eamings per share of \$5. It has 1 milion shares outstanding, each of which has a price of 535 . You are thinking of bicying TargetCo, which has earnings per shave of $1, 1 million shares cutstanding, and a price per share of \$28. You wit pay for TargetCo by issuling new shares. There are no expected synergies from the fransoction. Suppcse yeur offor an exchange ratio such that, at current pre-arnouncement share proces for both firms, the offer represents a 23% presmium to buy TargetCo. Assume that on the announcement the target, price wir go up and your price will go down to reflect the fact that you are witing to pay a premium for TargetCa. Assume that the takoover will cocur with certainty and all market partiopants know this on the announcement of the takeover. a. What is the proe per share of the combined corporation immediately after the merger is comploted? b. What is the price of your company immediately atier the amouncement? c. What is the price of Targetco imsediately after the anouncement? d. What is the actual promium your company wil pay? a. What is the price per share of the combined corporation immedibtely afer the merger ia completed? The share price wist be 5 (Round to the nearest cent)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started