Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 31, Problem 13PS
a)
Summary Introduction
To determine: The missing figures.
b)
Summary Introduction
To determine: The number of shares exchanged
c)
Summary Introduction
To determine: Cost of merger for Company WE.
d)
Summary Introduction
To determine: Change in total market value of Company WE.
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World Enterprises is determined to report earnings per share of $2.80. It therefore acquires the Wheelrim and Axle Company. 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 $2.80 earnings per share objective.
a. Complete the table below for the merged firm.
b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
c. What is the cost of the merger to World Enterprises?
d. What is the change in the total value of the World Enterprises shares that were outstanding before the merger?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Required D
How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
Note: Do not round intermediate calculations and enter your answer rounded to 2 decimal places.
Shares exchanged for each share
There are only five companies in the market. Company B and Company D are planning to merge. Market shares of all the competitors are shown in the table below.
Company
Market share, %%
A
4040
B
2525
C
1414
D
1212
E
99
Calculate the difference between the HHI value after the proposed merger and the initial value. Write the exact answer. Do not round.
Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial
data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in
this merger.
Sales (millions)
Net income (millions)
Koala
$90
$9.4
O a. $2.23
O b. $2.75
O c. $2.25
O d. $2.21
Laser
$10
$1.2
Common shares outstanding (millions) 4.0
0.8
Earnings per share
$2.35
$1.50
Common stock (price per share) $35.00
$27.00
Calculate the post-merger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange
Chapter 31 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 31 - Prob. 1PSCh. 31 - Prob. 2PSCh. 31 - Prob. 3PSCh. 31 - Taxation Which of the following transactions are...Ch. 31 - Prob. 5PSCh. 31 - Prob. 6PSCh. 31 - Prob. 9PSCh. 31 - Merger gains and costs Sometimes the stock price...Ch. 31 - Merger motives Suppose you obtain special...Ch. 31 - Prob. 12PS
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