Pinder Ltd is considering a merger with Value Co, where Pinder Ltd will issue 2 of its own shares for 5 shares of Value Co. The share price for Pinder Ltd is$34.91 and the share price for Value Co is $10.20. The price-to-earnings ratio for Pinder Ltd is 10.40 and the price-to-earnings ratio for Value Co is 5.37. Thenumber of shares outstanding for Pinder Ltd is 480,652 and the number of shares outstanding for Value Co is 215,314. There are no operational synergiesexpected from the merger, but Pinder Ltd believes that the Value Co was undervalued by the market due the lack of investor relations management, and thatonce it is included as part of Pinder Ltd, that Value Co's business would be valued 50% higher in terms of price or the price-to-earnings ratios. Based only onthe information above, what is the expected price-to-earnings ratio of the combined firm if Pinder Ltd's beliefs are correct? (round to the nearest twodecimal places)Group of answer choicesa) 8.70b) 8.41c) None of the other answers.d) 9.42e) 9.93

The Price-to-Earnings ratio, also known as P/E ratio, is a financial metric used to assess the…

Answered: Pinder Ltd is considering a merger with…

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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Required: (a)Assuming a rights issue of shares is made, calculate: (i)the theoretical ex-rights price of an ordinary share in Devonian plc (ii)the value of the rights for each original ordinary share. (b)Calculate the price of an ordinary share in Devonian plc in one year’s time assuming: (i)a rights issue is made (ii)a loan issue is made. Comment on your findings.
National Co. recently completed a 3-for-1 stock split. Prior to the split, the company had 10 million shares outstanding and its stock price was P150 per share. After the split, the total market value of the company’s stock equaled P1.5 billion. What was the price of the company’s stock following the stock split?
Daisy Corp. recently completed a 2-for-1 stock split. Before the split, the company had 10,000,000 shares outstanding and its stock price was P150 per share. After the split, the total market value of the company’s stock equaled P1.5 billion. The total share capital balance of Daisy Corp. is P350,000,000. 1. What was the price of the company’s stock following the stock split? 2. Determine the new par value of each share.
Nataro, Inc is planning on merging with Celestia Corp. Nataro, Inc with will pay shareholders the current value of their stock using shares of Nataro as the form of payment. Nataro has 5600 shares outstanding at a market price of $27.25 per share. Celestia Corp has 8,000 shares outstanding at a market price of $5.75 per share. The expected synergy created by the merger is $4200. What is the value of the merged firm (excludes cost of acquisition)? A. 205600 B. 201400 C. 159600 D. 54400 E. 68750
Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 1,800 shares of stock outstanding at a market price of $40 a share. Firm B has 1,200 shares outstanding at a price of $47 a share. What is the value per share of the merged firm?
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 16 23 Shares outstanding 96,000 230,000 Earnings $ 180,000 $ 900,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms? a-1. EPS a-2. PE b. Synergy value
Hassinah, Incorporated, is proposing a rights offering. Presently, there are 800,000 shares outstanding at $48 each. There will be 160,000 new shares offered at $40 each. a. What is the new market value of the company? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. How many rights are associated with one of the new shares? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. What is the ex-rights price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the value of a right? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. New market value b. Number of rights needed c. Ex-rights price d. Value of a right
Venture plc has issues ordinary shares of 20 million £1.00 shares. On 7th June, the Stock Exchange closing price of the shares was £12.00. Early on the morning of 8th June, the business publicly announced that its plan to acquire another business. On 9th June, the business announced its intention to raise the necessary money to finance the acquisition, totaling £100 million, through a rights issue priced at £8.00 per share. Required: (a) Determine how many new shares need to issue and the theoretical ex-rights price. (b) Calculate the value of rights per existing share and the effect on the wealth of a person who owns 200 shares in Venture plc before the rights issue, in each case where the shareholder takes up the rights, sells the rights and does nothing. (c) Discuss why companies make rights issues of equity, rather than raising the equity in some other way.
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A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows: Minnie Corporation Mickey Corporation Total earnings $1,682,000 $2,581,000 Number of shares of stock outstanding 290,000 890,000 EPS $5.80 $2.90 P/E ratio 10X 20X Market price per share $58 $58 a. On a share-for-share exchange basis, what will the postmerger EPS be? (Round the final answer to 2 decimal places.) Postmerger earnings per share $ b. If Mickey Corporation pays a 25 percent premium over the market value of Minnie Corporation, how many shares will be issued? (Do not round intermediate calculations.) Shares issued shares c. With the 25 percent premium, what will the postmerger EPS be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Postmerger earnings per share $
ABC Company had 5,000 ordinary shares of P500 par value outstanding and 500 preference shares of P1,000 par value outstanding. The current market price of the ordinary share is P1,200 and total equity amounts to P3,600,000. The preference shareholders have a liquidation preference of P1,400 per share and no dividends are in arrears. What is the book value per ordinary share? (Round answer to a whole number)
The shareholders of Tilbury Company have voted in favour of a buyout offer from Dover Corporation. Information about each firm is given here: Price/earnings ratio Shares outstanding Earnings Tilbury 16.00 96,000 $190,000 Dover 33 330,000 $950,000 Tilbury's shareholders will receive one share of Dover stock for every three shares they hold in Tilbury. (Do not leave any empty spaces; input a O wherever it is required.) a-1. What will the EPS of Dover be after the merger? (Round the final answer to 3 decimal places. Omit "$" sign in your response.) EPS a-2. What will the P/E ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) PE times b. What must Dover feel is the value of the synergy between these two firms? (Omit "$" sign in your response.) Synergy value $

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