Buyer Cafe is attempting to acquire the Target Club. Certain financial data on these corporations are summarized in the following table. Item Buyer Cafe Target Club Earnings Available for common stock $20,000 $8,000 Number of shares of common stock outstanding 20,000 4000 Market price per share $12 $24 EPS $1 $2 Buyer’s Cafe has sufficient authorized but unissued shares to carry out the proposed merger. If the ratio of exchange is 1.8, what will be the new earnings per share (EPS) of the merged firm?

Buyer Cafe is attempting to acquire the Target Club. Certain financial data on these corporations are summarized in the following table. Item Buyer Cafe Target Club Earnings Available for common stock $20,000 $8,000 Number of shares of common stock outstanding 20,000 4000 Market price per share $12 $24 EPS $1 $2 Buyer’s Cafe has sufficient authorized but unissued shares to carry out the proposed merger. If the ratio of exchange is 1.8, what will be the new earnings per share (EPS) of the merged firm?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter23: Corporate Restructuring

Section: Chapter Questions

Problem 3P

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Marla's Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table. Item Marla's Cafe Victory Club Earnings available for common stock $45,000 $8,000 Numbers of shares of common stock outstanding $50,000 $7,000 Market price per share $16 $30 Marla's Cafe has sufficient authorized but unissued shares to carry out the proposed merger. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares of each firm?
M’s Club is attempting to acquire the V’s Club. Certain financial data on these corporations aresummarized in the following table.Item M’s Club V’s ClubEarnings available for common stock $20,000 $8,000Number of shares of common stock outstanding 20,000 4,000Market price per share $12 $24M’s Club has sufficient authorized but unissued shares to carry out the proposed merger.a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original sharesof each firm?b. Repeat part a if the ratio of exchange is 2.0.c. Repeat part a if the ratio of exchange is 2.2.d. Discuss the principle illustrated by your answers to parts a through c
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 16 23 Shares outstanding 96,000 230,000 Earnings $ 180,000 $ 900,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms? a-1. EPS a-2. PE b. Synergy value
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: BreadButterPrice-earnings ratio1023Shares outstanding75,000260,000Earnings$ 230,000$ 1,040,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1.What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2.What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b.What must Butter feel is the value of the synergy between these two firms?
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 7.2 14.4 Shares outstanding 73,000 146,000 Earnings $ 210,000 $ 630,000 Bread’s shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms?
Data for Henry Company and Mayer Services are given in the following table. Henry Company is considering merging with Mayer by swapping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. Item Henry Company Mayor Services Earnings Available for Common Stock $225,000 $50,000 Number of Shares of Common Stock Outstanding $90,000 $15,000 Market Price per Share $45 $50 Calculate the price/earnings (P/E) ratio used to purchase Mayer Services. Calculate the post-merger earnings per share (EPS) for Henry Company. Calculate the expected market price per share of the merged firm. Discuss this result in light of your findings in part a.
Data for Henry Company and Mayer Services are given in the following table : Item Henry Company Mayer Services Earnings available for common stock $195,000 $45,000 Number of shares of common stock outstanding 75,000 25,000 Market price per share $31 $23 Henry Company is considering merging with Mayer by swapping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. a. Calculate the ratio of exchange in market price. b. Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company. c. Calculate the price/earnings (P/E) ratio used to purchase Mayer Services.
Use the following information for the next two problems. EPS and merger terms Expanding Corporation is interested in acquiring Target Company by swapping 0.4 share of its stock for each share of Target's stock. Expanding Co. has sufficient authorized but unissued shares to carry out the proposed merger. Certain financial data on these companies are given in the following table. Item Expanding Co. Target Co. Earnings Available for common stock $200,000 $50,000 Number of shares of common stock outstanding 50,000 20,000 Earnings per share (EPS) $4.00 $2.50 Market price per share $50 $15 Price/earnings (P/E) ratio 12.5 6 How many new shares of stock will Expanding have to issue to make the proposed merger? If the earnings for each firm remain unchanged, what will the post-merger earnings per share be?
Use the following information for the next two questions. Tangy is attempting to acquire Target. Tangy has sufficient authorized but unissued shares to carry out the proposed merger. Selected financial data is presented for both companies in the table below: Item Tangy Target Co. Earnings Available for common stock $10,000,000 $1,000,000 Number of shares of common stock outstanding 1,000,000 50,000 Market price per share $100 $120 Calculate the EPS of Tangy and Target before the merger. 2. If the ratio of exchange is 1.8, what will be the earnings per share of the merged company?
A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows: Minnie Corporation Mickey Corporation Total earnings $1,682,000 $2,581,000 Number of shares of stock outstanding 290,000 890,000 EPS $5.80 $2.90 P/E ratio 10X 20X Market price per share $58 $58 a. On a share-for-share exchange basis, what will the postmerger EPS be? (Round the final answer to 2 decimal places.) Postmerger earnings per share $ b. If Mickey Corporation pays a 25 percent premium over the market value of Minnie Corporation, how many shares will be issued? (Do not round intermediate calculations.) Shares issued shares c. With the 25 percent premium, what will the postmerger EPS be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Postmerger earnings per share $
Data for Henry Company and Mayer Services are given in the following table. Henry Company is considering merging with Mayer by swapping 1.25 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple after the merger as before merging. Item Henry Company Mayor Services Earnings Available for Common Stock $225,000 $50,000 Number of Shares of Common Stock Outstanding $90,000 $15,000 Market Price per Share $45 $50 Calculate the ratio of exchange in market price. Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company.
Warehouse Stationary is planning on merging with Whitcoulls. Warehouse's will pay Whitcoulls's shareholders the current value of their stock in shares of Warehouse's Equipment. Warehouse's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Whitcoulls's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm assuming there is no synergy?

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Item	Buyer Cafe	Target Club
Earnings Available for common stock	$20,000	$8,000
Number of shares of common stock outstanding	20,000	4000
Market price per share	$12	$24
EPS	$1	$2