What will the earnings per share

Assignment Help Accounting Basics

Reference no: EM132187688

Question - Consider the following premerger information about Firm A and Firm B.

	Firm A	Firm B
Total earnings	$2,300	$700
Shares outstanding	1,100	300
Price per share	$41	$45

Assume that Firm A acquires Firm B via an exchange of stock at a price of $47 for each share of B's stock. Both A and B have no debt outstanding.

a. What will the earnings per share, EPS, of Firm A be after the merger?

b. What will Firm A's price per share be after the merger if the market incorrectly analyzes this reported earnings growth (that is, the price-earnings ratio does not change)?

c. What will the price-earnings ratio of the post-merger firm be if the market correctly analyzes the transaction?

d-1. If there are no synergy gains, what will the share price of A be after the merger?

d-2. What will the price-earnings ratio be?

d-3. What does your answer for the share price tell you about the amount A bid for B? Was it too high? Too low?

Reference no: EM132187688

Questions Cloud

Evaluate the impact on each of given technologies : Your final evaluation of cryptography will be to determine the difference between AES and 3DES. Evaluate the impact on each of these technologies.

Member of your management team reports : A member of your management team reports to you that she is working to get your customers to pay on shorter terms

Describe the scope of the project and control measures : You are now in the final stage of the project plan development. All previous documentation should be combined into one document that will serve as the statement

What is the npv of the purchase of the company : What is the NPV of the purchase of the company when you include the consideration of the $20 million project?

What will the earnings per share : Assume that Firm A acquires Firm B via an exchange of stock at a price of $47 for each share of B's stock. What will the earnings per share

Identify and expound on one fruit you exhibit : Identify and expound on one fruit you exhibit most consistently and 1 fruit that you exhibit least consistently when teaching others

If unemployment increase what happens to gdp growth : Question: If unemployment increase what happens to GDP Growth?

Increase in the growth rate of the money supply : Compared with a closed economy, an increase in the growth rate of the money supply in an open economy increases aggregate demand by a:

Develop a request for proposal plan : Develop a Request for Proposal (RFP) plan to solicit qualified vendors that could partner with your internal team to deliver optimum IT service delivery.

User Account

All Pages