The following data are pertinent for companies A and B. A Shs 20 million 10 million 18 в Shs 4 million 1 million 10 Present Earnings No of shares Price/earning ratio If the two companies were to merge and the exchange ratio were one share of Company A for each share of Company B, what would be the initial impact on earnings per share of the two companies? what is the market value exchange ratio? Is the merger likely to take place? If the exchange ratio were two shares of Company A for each share of Company B what would happen with respect to the above? If the exchange ratio were 1.5 shares of Company A for each share of Company B, what would happen? What exchange ratio would you recommend? а. b. С. d.
The following data are pertinent for companies A and B. A Shs 20 million 10 million 18 в Shs 4 million 1 million 10 Present Earnings No of shares Price/earning ratio If the two companies were to merge and the exchange ratio were one share of Company A for each share of Company B, what would be the initial impact on earnings per share of the two companies? what is the market value exchange ratio? Is the merger likely to take place? If the exchange ratio were two shares of Company A for each share of Company B what would happen with respect to the above? If the exchange ratio were 1.5 shares of Company A for each share of Company B, what would happen? What exchange ratio would you recommend? а. b. С. d.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION TWo
The following data are pertinent for companies A and B.
A
B
Present Earnings
No of shares
Shs 20 million
10 million
Shs 4 million
1 million
10
Price/earning ratio
18
a. If the two companies were to merge and the exchange ratio were one
share of Company A for each share of Company B, what would be the
initial impact on earnings per share of the two companies? what is the
market value exchange ratio? Is the merger likely to take place?
If the exchange ratio were two shares of Company A for each share of
Company B what would happen with respect to the above?
If the exchange ratio were 1.5 shares of Company A for each share of
Company B, what would happen?
What exchange ratio would you recommend?
b.
C.
d.
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