Consider two firms, Bob Company and Cat Enterprises, both with earnings of $10 per share and 5 million shares outstanding. Cat is a mature company with few growth opportunities and a stock price of $25 per share. Bob is a new firm with much higher growth opportunities and a stock price of $40 per share. Assume Bob acquires Cat using its own stock and the takeover adds no value. What is the change in Bob's earnings per share as a result of the acquisition? Round to the nearest cent as needed. O $3.85 O $2.31 O $10.00 O $5.00
Consider two firms, Bob Company and Cat Enterprises, both with earnings of $10 per share and 5 million shares outstanding. Cat is a mature company with few growth opportunities and a stock price of $25 per share. Bob is a new firm with much higher growth opportunities and a stock price of $40 per share. Assume Bob acquires Cat using its own stock and the takeover adds no value. What is the change in Bob's earnings per share as a result of the acquisition? Round to the nearest cent as needed. O $3.85 O $2.31 O $10.00 O $5.00
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:Consider two firms, Bob Company and Cat Enterprises, both with earnings of $10 per share and 5
million shares outstanding. Cat is a mature company with few growth opportunities and a stock
price of $25 per share. Bob is a new firm with much higher growth opportunities and a stock price
of $40 per share. Assume Bob acquires Cat using its own stock and the takeover adds no value.
What is the change in Bob's earnings per share as a result of the acquisition? Round to the nearest
cent as needed.
-$3.85
$2.31
$10.00
O $5.00
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