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 7.2 14.4 Shares outstanding 73,000 146,000 Earnings $ 210,000 $ 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.) b. What must Butter feel is the value of the synergy between these two firms?
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 7.2 14.4 Shares outstanding 73,000 146,000 Earnings $ 210,000 $ 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.) b. What must Butter feel is the value of the synergy between these two firms?
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
Related questions
Question
|
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 | 7.2 | 14.4 |
| Shares outstanding | 73,000 | 146,000 |
| Earnings | $ 210,000 | $ 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 |
| b. |
What must Butter feel is the value of the synergy between these two firms? |
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