1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
katrin [286]
3 years ago
11

Acquiring Company is considering the acquisition of Target Company in a stock for stock transaction in which Target Company woul

d receive $50.00 for each share of its common stock. The Acquiring Company does not expect any change in its price/earnings multiple after the merger.
Acquiring Co. Target Co.

Earnings available for common stock $150,000 $30,000

Number of shares of common stock outstanding $60,000 $20,000

Market price per share $60.00 $40.00

Using the information provided above on these two firms and showing your work, calculate the following:

1) What is the share exchange ratio?

2) How many new shares will be issued by Acquiring Company?

3) What is the post-merger EPS of the combined company?

4) What is the post-merger share price of the combined company?

5) If the purchase is using 100% cash and all the cash is borrowed at an annual rate of 8%, what is post-merger EPS of the combined company, assuming the tax rate is 40%?
Business
1 answer:
ad-work [718]3 years ago
6 0

Answer:

1) 0.8333

2) 16,666

3) 2.33

4) 56.40

5) 2.2

Explanation:

Share Exchange Ratio = Price per share for Target Company / Market price per share for Acquiring Company  = $50 / $60  =  0.8333

New shares issued by Acquiring Company = Shares of Target Company x Exchange ratio (20,000 x 0.8333) = 16,666

Total shares outstanding of the combined companies = 60,000 + 16,666  = 76,666

Post-merger EPS of the combined companies = ($150,000 + $30,000)/ 76,666 = $2.35

Pre-merger EPS of Acquiring Company = $150,000 / 60,000 = $2.50

Post-merger share price = $2.35 x 24 (pre-merger P/E = $60.00/$2.50) = $56.40

Purchase price = 50 * 20,000 = 1,000,000

Interest expense = 1,000,000 * 8% = 80,000

Post-merger earnings = 150,000 + 30,000 – 80,000 * (1-0.4) = 132,000

Therefore, Post-merger EPS of the combined companies = 132,000/60,000 = 2.2

You might be interested in
Sigmund wrote four checks last month, and these were the only transactions for his checking account . Accourding to his register
GREYUIT [131]
The answer is $177.48
7 0
3 years ago
Read 2 more answers
When using ___________, finalists are ordered from the most desirable to the least desirable based on results of discretionary a
Gennadij [26K]

When using <u>Ranking</u>, finalists are ordered from the most desirable to the least desirable based on results of discretionary assessments.

Operations control is chiefly worried about planning, organizing, and supervising inside the contexts of manufacturing, manufacturing, or the availability of services. As such, it's far delivery-focused, ensuring that a company correctly turns inputs to outputs in a green manner.

It actually approaches the cease-to-stop technique of shifting and storing elements of completed and unfinished goods. as an example, a vehicle production business enterprise will save and transfer automobiles (or their components) in a scientific manner.

The number one goal of operations control is to utilize the sources of the enterprise, to create such services or products that fulfill the needs of the clients, with the aid of offering “proper component at the right rate, vicinity and time”.

Learn more about Operations management here

brainly.com/question/26322690

#SPJ4

8 0
2 years ago
On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,700,000 for $5,000,000. Rigsby appropriately uses the i
xxTIMURxx [149]

Answer:

$127,400

Explanation:

Gross profit ratio = [(sale - cost) ÷ sale price] × 100

                           = [($5,000,000 - $3,700,000) ÷ $5,000,000] × 100

                          = 0.26 × 100

                          = 26%.

Gross profit on down payment is recognized in 2019:

= Down payment × Gross profit ratio

= $490,000 × 26%

= $127,400

5 0
3 years ago
Antonio lives in New York City and runs a business that sells guitars. In an average year, he receives $723,000 from selling gui
dexar [7]

Answer:

566677

Explanation:

3 0
3 years ago
Bethany and Claiborne want to form a limited liability company (LLC) to manage their business, DoReMi Music. Like corporations,
Ivenika [448]

Answer:

Nine jurisdiction which are California, District of Columbia, Florida, Idaho, Iowa, Nebraska, New Jersey, Utah, and Wyoming

Explanation:

The Uniform Limited Liability Company Act (ULLCA) was an act that was formed in 1995 and was amended in 1996 and 2006 which allows small businesses enjoy tax advantage of a partnership.

6 0
3 years ago
Other questions:
  • Which type of triangle is best for construction?
    9·1 answer
  • g Your grandfather purchased a $1,000 face-value bond 10 years ago. When he purchased the bond, it had 30 years to maturity and
    6·1 answer
  • A manager must make a decision on shipping. There are two shippers, A and B. Both offer a two-day rate: A for $522 and B for $53
    10·1 answer
  • Activity Cost Pools Estimated Overhead Cost Expected Activity Assembly $ 515,520 52,500 machine-hours Processing orders $ 62,763
    5·1 answer
  • A European used car dealer built a multiple linear regression model to predict the resale price of a used car based on its condi
    15·1 answer
  • Consider an income guarantee program with an income guarantee of $6,000 and a benefit reduction rate of 50%. A person can work u
    7·1 answer
  • The primary difference between the accrual basis and the cash basis of accounting is: (You may select more than one answer. Sing
    7·1 answer
  • A study of college graduates involves three variables: income level, job satisfaction, and one-way commute times to work. List s
    9·1 answer
  • When thieves use your name and good credit rating to get cash or buy things, they are engaging in Multiple Choice credit mishand
    7·1 answer
  • Gareth bought a home for $135,000. The home gained 2. 2% in value every year for eight years until Gareth sold it. How much prof
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!