@ 1 75% AT&T LTE 11:52 AM 48 Exit Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. There are no expected synergies from the transaction. Rearden will pay for Associated Steel by issuing new shares, and the exchange ratio will be such that, at current pre- announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares will Rearden have to issue? 3.6 million 8.3 million 1.2 million 4.9 million
@ 1 75% AT&T LTE 11:52 AM 48 Exit Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. There are no expected synergies from the transaction. Rearden will pay for Associated Steel by issuing new shares, and the exchange ratio will be such that, at current pre- announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares will Rearden have to issue? 3.6 million 8.3 million 1.2 million 4.9 million
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:@ 1 75%
AT&T LTE
11:52 AM
48
Exit
Rearden Metal Company has earnings per
share of $2. It has 10 million shares
outstanding and is trading at $20 per share.
Rearden is thinking of buying Associated
Steel, which has earnings per share of
$1.25, 4 million shares outstanding, and a
price per share of $15. There are no
expected synergies from the transaction.
Rearden will pay for Associated Steel by
issuing new shares, and the exchange ratio
will be such that, at current pre-
announcement share prices for both firms,
the offer represents a 20% premium to buy
Associated Steel. How many new shares
will Rearden have to issue?
3.6 million
8.3 million
1.2 million
4.9 million
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