Your company has earnings per share of $$$$3\mathrm{.}87.$ It has $1\mathrm{.}901$ million shares$$ outstanding, each of which has a price of $ $54\mathrm{.}00.$ You are thinking of buying TargetCo$,$ which has earnings per share of $$$$1\mathrm{.}94,1\mathrm{.}307$ million shares$$ outstanding, and a price per share of $$$$27\mathrm{.}00.$ You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction. If companies in the same industry as TargetCo are trading at multiples of $16$ times$$ earnings, what would be one estimate of an appropriate premium for TargetCo$?$

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Part $1$

TargetCo has $$$$1\mathrm{.}94$ in$$ earnings, so if other companies in its industry are trading at $16$ times$$ earnings, then a starting point for a valuation of TargetCo in this transaction might be

$$

$$30\mathrm{.}94$

$$31\mathrm{.}14$

$$31\mathrm{.}04$

per$$ share, implying a

$$

$15\mathrm{.}3\%$

$15\mathrm{.}0\%$

$14\mathrm{.}6\%$

premium.