Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Graham & Sons wishes to evaluate a proposed merger into the RCN Group. Graham had 2019 earnings of $250,000, has 100,000 shares of common stock outstanding, and expects earnings to grow at an annual rate of 9%. RCN had 2019 earnings of $900,000, has 200,000 shares of common stock outstanding, and expects its earnings to grow at 3% per year.
a. Calculate the expected earnings per share (EPS) for Graham & Sons for each of the next 5 years (2020-2024) without the merger.
part A answers are completed
year 2020: $2.725
year 2021: $2.97425
year 2022: $3.24239
year 2023: $3.53487
year 2024: $3.85425
b. What would Graham's stockholders earn in each of the next 5 years (2020-2024) on each of their Graham shares swapped for RCN shares at a ratio of 0.8 share of RCN for 1 share of Graham?
Part B is where I need help.
year 2020 EPS: $3.43
year 2021 EPS: $ ?
year 2022 EPS: $ ?
year 2023 EPS: $ ?
year 2022 EPS: $ ?
year 2023 EPS: $ ?
year 2023 ESP: $ ?
please help me find calculation for year 2021 to year 2024 in part B
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 4 steps with 7 images
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
b. The expected post-merger EPS in year 2020 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is
$3.43 (Round to the nearest cent.)
The expected post-merger EPS in year 2021 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $3.58 (Round to the nearest cent.)
The expected post-merger EPS in year 2022 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $3.73 (Round to the nearest cent.)
The expected post-merger EPS in year 2023 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $3.90 (Round to the nearest cent.)
The expected post-merger EPS in year 2024 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $4.07.(Round to the nearest cent.)
(Please double check. These are the answers (in bold print) that I got.)
Solution
by Bartleby Expert
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
b. The expected post-merger EPS in year 2020 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is
$3.43 (Round to the nearest cent.)
The expected post-merger EPS in year 2021 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $3.58 (Round to the nearest cent.)
The expected post-merger EPS in year 2022 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $3.73 (Round to the nearest cent.)
The expected post-merger EPS in year 2023 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $3.90 (Round to the nearest cent.)
The expected post-merger EPS in year 2024 for Graham's stockholders on each of their original shares of stock which was swapped for RCN stock is $4.07.(Round to the nearest cent.)
(Please double check. These are the answers (in bold print) that I got.)
Solution
by Bartleby Expert
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- L. Sanders Manufacturing paid a dividend last year of $5 per share. The dividend is expected to grow at a constant rate of 8% per year. The price of L. Sanders Manufacturing's stock today is $29 per share. If L. Sandaers Manufacturing decides to issue new common stock, flotation costs will equal $2.50 per share. Based on the above information, the cost of new common stock is OA. 28.38%. OB. 31.40%. OC. 26.62%. OD. 24.12%. OE. None of the above.arrow_forwardThe Giant Machinery has the current capital structure of 65% equity and 35% debt. Its net income inthe current year is $250,000. The company is planning to launch a project that will require aninvestment of $175,000 next year. Currently, the share of Giant machinery is $25/share.Required:a) How much dividend Giant Machinery can pay its shareholders this year and what is the dividendpayout ratio of the company? Assume the Residual Dividend Payout Policy applies. b) If the company is paying a dividend of $2.50/share and tomorrow the stock will go ex-dividend.Calculate the ex-dividend price tomorrow morning. Assuming the tax on dividend is 15%. c) Little Equipment for Hire is a subsidiary in the Giant Machinery and currently under the liquidationplan due to the severe contraction of operation due to coronavirus. The company plans to paya total dividend of $2.5 million now and $ 7.5 million one year from now as a liquidating dividend.The required rate of return for shareholders is 12%.…arrow_forwardLohn Corporation is expected to pay the following dividends over the next four years: $12, $9, $6, and $5. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 15 percent, what is the current share price? Multiple Choice $59.45 $63.32 $55.36 $54.83 $5771arrow_forward
- A company has net earnings of AED 10,000 for the current vear and suppose the company maintai the same earnings for the next year. The company has 1,000 total outstanding shares during the current year. The company decides to buyback 40% of its shares in the following year. Show how this decision will impact the company's earnings per share?arrow_forwardAbl ltd. Paid a dividend of $250000 this year. The current return to shareholders of the companies in the same industry an Abl ltd. is 12%, although it is expected that an additional risk premium of 2% will be applicable to Abl ltd., being a smaller and unquoted company. Compute the expected valuation of Abl ltd., if : 1. The current level of dividend is expected to continue into the foreseeable future 2. The dividend is expected to grow at a rate of 4%pa into the foreseeable future 3. The dividend is expected to grow at a 3% rate for three years and 2% afterwardsarrow_forwardK AFW Industries has 189 million shares outstanding and expects earnings at the end of this year of $729 million. AFW plans to pay out 58% of its earnings in total, paying 36% as a dividend and using 22% to repurchase shares. If AFW's earnings are expected to grow by 7.2% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 11.4%. ECCORD The price per share will be $. (Round to the nearest cent.) his efuarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education