BQ. Incorporated, is considering making an offer to purchase Report Publications. The vice president of finance has collected the following information: Price-earnings ratio Shares outstanding Earnings Dividends iReport 12.4 8.9 1,600,000 170,000 $4,700,000 $685,000 $970,000 $420,000 BQ BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 5 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would BQ's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If BQ were to offer $35 in cash for each share of iReport, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) d. What's the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of iRopor
BQ. Incorporated, is considering making an offer to purchase Report Publications. The vice president of finance has collected the following information: Price-earnings ratio Shares outstanding Earnings Dividends iReport 12.4 8.9 1,600,000 170,000 $4,700,000 $685,000 $970,000 $420,000 BQ BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 5 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 7 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would BQ's gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If BQ were to offer $35 in cash for each share of iReport, what would the NPV of the acquisition be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.) d. What's the most BQ should be willing to pay in cash per share for the stock of iReport? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of iRopor
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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The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Aa 05.
Transcribed Image Text:BQ. Incorporated, is considering making an offer to purchase iReport Publications. The
vice president of finance has collected the following information:
Price-earnings ratio
Shares outstanding
Earnings
Dividends
BQ
iReport
12.4
8.9
1,600,000
170,000
$4,700,000 $685,000
$970,000 $420,000
BQ also knows that securities analysts expect the earnings and dividends of iReport to
grow at a constant rate of 5 percent each year. BQ management believes that the
acquisition of iReport will provide the firm with some economies of scale that will
increase this growth rate to 7 percent per year.
a. What is the value of iReport to BQ? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g.,. 32.16.)
b. What would BQ's gain be from this acquisition? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.. 32.16.)
c. If BQ were to offer $35 in cash for each share of Report, what would the NPV of the
acquisition be? (Do not round intermediate calculations and round your answer to 2
decimal places, e.g.. 32.16.)
a. Value of iReport
b. Gain
c. NPV
d. Maximum share price
e. NPV
d. What's the most BQ should be willing to pay in cash per share for the stock of
iReport? (Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)
e. If BQ were to offer 200,000 of its shares in exchange for the outstanding stock of
iReport, what would the NPV be? (Do not round intermediate calculations and round
your answer to 2 decimal places, e.g.. 32.16.)
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