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:### Problem C3:
Firm Bidder has an earnings per share (EPS) of £3. It has 12 million shares outstanding, trading at £20 per share. Firm Target has an EPS of £1.5, 5 million shares outstanding, and a price of £18. The Bidder is considering buying Target by issuing new shares. There are no synergies.
#### Questions:
a. **If Bidder pays no premium, what are its EPS after the takeover?**
b. **What is the price-earnings ratio of Bidder after the takeover?**
c. **Suppose that Bidder pays a 15% premium. What are its EPS after the takeover?**
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