What is the gain from the acquisition

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Reference no: EM132032452

As treasurer of Leisure Products, Inc., you are investigating the possible acquisition of Plastitoys. You have the following basic data:

	Leisure Products	Plastitoys
Forecast earnings per share	$6	$1.60
Forecast dividend per share	$4	$.80
Number of shares	1,500,000	900,000
Stock price	$90	$20

You estimate that investors currently expect a steady growth of about 7% in Plastitoys's earnings and dividends. You believe that Leisure Products could increase Plastitoys's growth rate to 9% per year, without any additional capital investment required.

a. What is the gain from the acquisition? (Do not round intermediate calculations.)

Gain $

b. What is the cost of the acquisition if Leisure Products pays $25 in cash for each share of Plastitoys? (Do not round intermediate calculations.)

Cost $

c. What is the cost of the acquisition if Leisure Products offers one share of Leisure Products for every three shares of Plastitoys? (Do not round intermediate calculations.)

Cost $

d. How would the cost of the cash offer and the share offer alter if the expected growth rate of Plastitoys were not increased by the merger?

Cash $
Share $

Reference no: EM132032452

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