EPS and postmerger price Data for Henry Company and Mayer Services are given in the following table, Henry Company is considering merging with Mayer by swapping 1.35 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. a. Calculate the ratio of exchange in market price. b. Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company. c. Calculate the price/earnings (P/E) ratio used to purchase Mayer Services. d. Calculate the post-merger earnings per share (EPS) for Henry Company. e. Calculate the expected market price per share the merged firm. Data table C (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Item Henry Company Mayer Services $205,000 Earnings available for common stock $60,000 Number of shares of common stock outstanding 125,000 20,000 Market price per share $39 $57

EPS and postmerger price Data for Henry Company and Mayer Services are given in the following table, Henry Company is considering merging with Mayer by swapping 1.35 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. a. Calculate the ratio of exchange in market price. b. Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company. c. Calculate the price/earnings (P/E) ratio used to purchase Mayer Services. d. Calculate the post-merger earnings per share (EPS) for Henry Company. e. Calculate the expected market price per share the merged firm. Data table C (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Item Henry Company Mayer Services $205,000 Earnings available for common stock $60,000 Number of shares of common stock outstanding 125,000 20,000 Market price per share $39 $57

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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4. The following table shows pre-merger data for ABC Company and XYZ, Inc. ABC XYZ No of share outstanding 2,000,000 5,000,000 EPS $2.50 $4.00 Price per share $15.00 $60 a) Assume XYZ is taking over ABC by issuing one of its shares for four shares of ABC. If there is no synergy, what would be the post-merger share price of XYZ? What would be the NPV of the merger? b) Assume there is synergy value of $4,200,000 created from the merger. What would be the post-merger price per share of XYZ? What would be the NPV of the merger? 5. Lazos Company is in distress mainly due to its failure to adopt the current technology. Creditors took Lazos to bankruptcy court and Lazos is fighting for a reorganization. The following is its condensed balance sheet. Book Value Market Value Current assets $ 120,000.00 $ 100,000.00 Machinery 200,000.00 150,000.00 Other fixed…
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Kk.415.
Ee 111.
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