CMA Study Group

PV P2 question

  • 1.  PV P2 question

    Posted 10-24-2020 08:57 AM


  • 2.  RE: PV P2 question

    Posted 10-25-2020 04:18 AM
    Hi,

    Slae proceeds = 2500000
    tax savings     = 1600000    [250000-6500000*0.4 = -1600000]
    Cash flow          4100000


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    Sanjana
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  • 3.  RE: PV P2 question

    Posted 29 days ago
    Question: 29T Corporation is considering the acquisition of S Company with common stock. The following
    financial information is available regarding the two companies:
    T
    S
    Net income $8,000,000 $2,000,000
    Common shares outstanding 4,000,000 1,600,000
    Earnings per share $2.00 $1.25
    Price/earnings ratio 12 8
    T plans to offer S's shareholders a 20% premium over the market price of the S stock. What would be the earnings
    per share for the surviving company immediately following the merger?
    A. $2.143
    B. $2.083
    C. $1.714
    D. $1.667


    Please advice, thank you





  • 4.  RE: PV P2 question

    Posted 28 days ago

    Market price per company S's share = $1.25 × 8 = $10.00                

    Market price per company T's share = $2 × 12 = $24.00                

    Amount of cash to acquire Company S's stock = $10 × (1 + 20%)  × 1,600,000 = $19,200,000     

    Number of company T's share to issue to raise fund for acquisition of company S = $19,200,000 ÷ 24 = 800,000 shares

    Total Net income after merge = $8 million + 2 million = $10,000,000     

    Total share out standing after merge = 4,000,000 + 800,000 = 4,800,000          

    Earning per share = $10 millions ÷ 4,800,000 = $2.083   



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    PhucNgo Mai Thien
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