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What is the exchange ratio of market prices

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Reference no: EM132174347

QUESTION - MERGER & ACQUISITION

XYZ Company wants to acquire ABC Company by exchanging 1.6 shares for every share of ABC Company. XYZ anticipates to maintain the existing P/E ratio subsequent to the merger also. The relevant financial data are furnished below:

 

XYZ Company

ABC Company

Earnings after tax (EAT)

$1500000

$450000

Number of equity shares Outstanding (N)

300000

75000

Market price per share

$35

$40

1) What is the exchange ratio of market prices?

2) What is the premerger EPS and the P/E ratio for each company?

3) What was the P/E ratio used in acquiring ABC Co.

4) What is the EPS of XYZ Company after the acquisition?

5) What is the expected market price per share of the merged company?

Reference no: EM132174347

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