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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Original Message:
Sent: 10-28-2020 03:43 AM
From: Moustafa Mohamed Aly Abdel Nabi
Subject: PV P2 question
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
Original Message:
Sent: 10/25/2020 4:18:00 AM
From: Sanjana M
Subject: RE: PV P2 question
Hi,
Slae proceeds = 2500000
tax savings = 1600000 [250000-6500000*0.4 = -1600000]
Cash flow 4100000
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Sanjana
Original Message:
Sent: 10-24-2020 08:56 AM
From: Syed Yousuf Jamal
Subject: PV P2 question