The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Price-earnings ratio Shares outstanding Earnings Bread b. 7.2 73,000 $ 210,000 Butter 14.4 146,000 $630,000 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.) What must Butter feel is the value of the synergy between these two firms? (Do not round intermediate calculations.)
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Price-earnings ratio Shares outstanding Earnings Bread b. 7.2 73,000 $ 210,000 Butter 14.4 146,000 $630,000 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.) What must Butter feel is the value of the synergy between these two firms? (Do not round intermediate calculations.)
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:The shareholders of Bread Company have voted in favor of a buyout offer from Butter
Corporation. Information about each firm is given here:
Price-earnings ratio
Shares outstanding
Earnings
b.
Bread
7.2
73,000
$ 210,000
Bread's shareholders will receive one share of Butter stock for every three shares they
hold in Bread.
a-1. EPS
a-2. PE
b. Synergy value
Butter
14.4
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.)
What must Butter feel is the value of the synergy between these two firms? (Do not
round intermediate calculations.)
$
146,000
$630,000
Answer is complete but not entirely correct.
$
4.932✔
62.14
0
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