a. b. C. d- 1. d- 2. Answer is complete but not entirely correct. EPS Price per share Price- earnings Price per share Price- earnings S S $ 2.90 40.53 10.00 28.68 9.89 times times
a. b. C. d- 1. d- 2. Answer is complete but not entirely correct. EPS Price per share Price- earnings Price per share Price- earnings S S $ 2.90 40.53 10.00 28.68 9.89 times times
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
Related questions
Question
Transcribed Image Text:Consider the following premerger information about Firm A and Firm B:
Firm A
Firm B
$2,700
$900
200
1,000
$ 29 $ 33
Total earnings
Shares outstanding
Price per share
Assume that Firm A acquires Firm B via an exchange of stock at a price of $35 for each
share of B's stock. Both A and B have no debt outstanding.
a.
What will the earnings per share, EPS, of Firm A be after the merger? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What will Firm A's price per share be after the merger if the market incorrectly
analyzes this reported earnings growth (that is, the price-earnings ratio does not
change)? (Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)
What will the price-earnings ratio of the postmerger firm be if the market correctly
analyzes the transaction? (Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
If there are no synergy gains, what will the share price of A be after the merger? (Do
d-1. not round intermediate calculations and round your answer to 2 decimal places,
e.g., 32.16.)
C.
d-2.
If there are no synergy gains, what will the price-earnings ratio be? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Transcribed Image Text:a.
b.
C.
d-
1.
d-
2.
Answer is complete but not entirely correct.
EPS
Price per
share
Price-
earnings
Price per
share
Price-
earnings
$
2.90
40.53 x
10.00
28.68
9.89
times
times
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