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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