Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and istrading at $20 per share. Rearden is thinking of buying Associated Steel, which has earnings per shareof $1.25, 4 million shares outstanding, and a price per share of $15. There are no expected synergiesfrom the transaction. Rearden will pay for Associated Steel by issuing new shares, and the exchangeratio will be such that, at current pre-announcement share prices for both firms, the offer representsa 20% premium to buy Associated Steel. How many new shares will Rearden have to issue?1.2 million8.3 million4.9 million3.6 millionQuestion 81 ptsContinuing with Rearden's acquisition of Associated Steel from the prior question.. what will theprice per share of the combined corporation be after the acquisition?$28.32$19.12$9.83$17.19

Value of the company AS is calculated as price per share multiplied by the numbe rof shares…

Answered: Rearden Metal Company has earnings per…

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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Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $55 million. Zang currently has 3 million shares outstanding and will issue 2 million new shares. ESM charges a 5% spread. What is the correctly valued offer price? Do not round intermediate calculations. Round your answer to the nearest cent.
Management plans a $120 million IPO in which the offering price to the public will be $50 per share. The company will receive $47.50 per share. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs will total $400,000. If the stock price increases 14 percent on the first day of trading, what will be the total cost of issuing the securities? Total cost $________
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