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a-1. EPS a-2. PE b. Synergy value

a-1. EPS a-2. PE b. Synergy value

Essentials Of Investments
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
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Chap 26 Q 4

The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Price-earnings ratio Shares outstanding Earnings Bread 9.5 a-1. EPS a-2. PE b. Synergy value Butter 31 84,000 310,000 $ $ 280,000 950,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms?
Transcribed Image Text:The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Price-earnings ratio Shares outstanding Earnings Bread 9.5 a-1. EPS a-2. PE b. Synergy value Butter 31 84,000 310,000 $ $ 280,000 950,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms?
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