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Effects of a Stock Exchange Consider the following premerger information about Firm A and Firm B:
Assume that Firm A acquires Firm B via an exchange of stock at a price of $19 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 postmerger firm be if the market correctly analyzes the transaction?
d. If there are no synergy gains, what will the share price of A be after the merger? What will the price-earnings ratio be? What does your answer for the share price tell you about the amount A bid for B? Was it too high? Too low? Explain.
The firm has a tax rate of 30 percent, an opportunity cost of capital of 0 percent, and it expects net working capital to increase by $93,000.00 at the beginning of the project.
a. Describe the major types of exclusions typically found in insurance contracts.b. Why are exclusions used by insurers?
Suppose a stock is trading at $80 and has an annualized volatility of 0.4. Money may be borrowed to any tenor at 4% annualized.(a) What is the Black-Scholes value of such a call struck at 81 maturing in: One hour? Four hours? Two days? A week? A mont..
Graph a generalization of Exhibit 4.5 that includes portfolios with short positions in one of the two investments.
expected price. nelson corporation issues 200000 new shares of common stock to current stockholders at a 15 price per
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Assume the following facts about a firm's financing in the next year. Calculate the weighted cost of the capital of this project
Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter.
small motors inc which is currently operating at full capacity has sales of 29000 current assets of 1600 current
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