World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts: World Wheelrim Merged Firm and Axle Enterprises $2 $40 Earnings per share Price per share Price-earnings ratio Number of shares Total earnings |Total market value $2.50 $25 $2.67 20 10 100,000 $200,000 $4,000,000 200,000 500,000 $5,000,000 There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.67 earnings per share objective. Required: (a.) (Ь.) Complete the above table for the merged firm. Show all computations. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? (c.) (d.) What is the cost of the merger to World Enterprises? What is the change in the total market value of the World Enterprises shares that were outstanding before the merger?
World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts: World Wheelrim Merged Firm and Axle Enterprises $2 $40 Earnings per share Price per share Price-earnings ratio Number of shares Total earnings |Total market value $2.50 $25 $2.67 20 10 100,000 $200,000 $4,000,000 200,000 500,000 $5,000,000 There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.67 earnings per share objective. Required: (a.) (Ь.) Complete the above table for the merged firm. Show all computations. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? (c.) (d.) What is the cost of the merger to World Enterprises? What is the change in the total market value of the World Enterprises shares that were outstanding before the merger?
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
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Transcribed Image Text:World Enterprises is determined to report earnings per share of $2.67. It therefore acquires
the Wheelrim and Axle Company. You are given the following facts:
World
Wheelrim
Merged Firm
and Axle
Earnings per share
Price per share
Price-earnings ratio
Enterprises
$2
$40
$2.50
$25
$2.67
20
10
Number of shares
Total earnings
Total market value
100,000
$200,000
$4,000,000
200,000
500,000
$5,000,000
There are no gains from merging. In exchange for Wheelrim and Axle shares, World
Enterprises issues just enough of its own shares to ensure its $2.67 earnings per share
objective.
Required:
(a.)
(b.)
Complete the above table for the merged firm. Show all computations.
How many shares of World Enterprises are exchanged for each share of Wheelrim
and Axle?
(c.)
(d.)
What is the cost of the merger to World Enterprises?
What is the change in the total market value of the World Enterprises shares that
were outstanding before the merger?
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