Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If Rearden pays no premium to buy Associated Steel, then Rearden's price-earnings ratio after the merger will be closest to: 10.0. 10.42. 12.0. 7.8.
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- Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If Rearden pays no premium to buy Associated Steel, then Rearden's price/earnings ratio after the merger will be closest to: Answer choices A) 12 B) 10.42 C) 7.80 D) 10A large manufacturing company has offered to purchase Composites, Inc. for$32 per share. Before the merger proposal announcement, Composites wastrading at $20/share and, after the announcement, its share price jumped up to$28/share. It is estimated that, if the merger fails to go through, the price ofComposites will drop to $15/share. a) Assuming that the risk-free interest rate is 0%, how would you describea long position in Composites as a combination of positions in a risk-freebond and a binary put option? Please show your workings in detial.b) Assuming that the risk-free interest rate is 0%, how would you describea long position in Composites as a combination of positions in a risk-freebond and a binary call option? Please show your workings in detial.c) Please explain the event-driven strategies through the selling insuranceview.Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction.If Rearden offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel, then Rearden's earnings per share after the merger will be closest to: $1.84. $1.90. $2.00. $2.25.
- Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If Rearden offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel, then the price per share of the combined corporation after the merger will be closest to: Answer choices: A) $17.20 B) $26.00 C) $20.00 D) $19.12) Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. Assume Rearden offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares Rearden needs to issue to pay for this deal? What is the exchange ratio? What will be the price per share of the combined corporation after the merger? What will be the price per share of the Rearden immediately after the announcement? What will be the price per share of the Associated Steel immediately after the announcement? What is the actual premium Rearden will pay? Is this an accretive or dilutive deal?…Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. Assume Rearden offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares Rearden needs to issue to pay for this deal? What is the exchange ratio? What will be the price per share of the combined corporation after the merger? What will be the price per share of the Rearden immediately after the announcement? What will be the price per share of the Associated Steel immediately after the announcement? What is the actual premium Rearden will pay? Is this an accretive or dilutive deal? Compare…
- Consider two companies. Rearden Metal has earnings per share of €2, 10 million sharesoutstanding and its current stock price is €20. Associated Steel, has earnings per share of €1,25,4 million shares outstanding, and a stock price of €15Rearden Metal is thinking of buying Associated Steel and will pay for Associated Steel by issuingnew shares. Rearden Metal expects no synergies from the acquisitiorAssume that Rearden Metal offers an exchange ratio such that, at current pre-announcementshare prices for both firms, the offer represents a 20% premium to buy Associated Steel. a) Compute the price per share of the Rearden Metal that should be observed immediatelyafter the acquisition public announcement. b) Compute the price per share of the Associated Steel that should be observed immediatelyafter the acquisition public announcement.XYZ has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. XYZ is thinking of buying ABC, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. XYZ will pay for ABC by issuing new shares. There are no expected synergies from the transaction. A) If XYZ offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy ABC, then the price per share of the combined corporation after the merger will be closest to: B) If XYZ offers cash at a price such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy ABC, then the price per share of the combined corporation after the merger will be closest to:In recent years Constable Inc. has suffered losses, and its stock currently sells for only $0.50 per share. Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $21 per share. How many of the old shares must be given up for one new share to achieve the $21 price, assuming this transaction has no effect on total market value?
- The NFF Corp. has announced plans to acquirer LE Corp. NFF is trading for $35 per share and LE is trading for $25 per share, implying a pre-merger value of LE of approximately $4 billion. If the projected synergies are $1 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?The Woods Co. and the Mickelson Co. have both announced IPOs at $53 per share. One of these is undervalued by $11, and the other is overvalued by $2, but you have no way of knowing which is which. You plan to buy 800 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. If you could get 800 shares in Woods and 800 shares in Mickelson, what would your profit be? (Do not round intermediate calculations.) I found the price of an ideal situaiton but am not sure how to distribute numbers in the expected profit situationPizza Palace (PP), is considering purchasing a smaller chain, Western Mountain Pizza. PP’s analysts expect the merger to result in incremental net cash flows as follows: Y1=$1,900,000, Y2 = $2,200,000, Y3 = $3,500,000, Y4 =$5,800,000. In addition, Western’s Y4 cash flows are expected to grow at a constant rate of 4% after Y4. Western’s post merger beta is expected to be 2 and its tax rate would be 30%. The risk free rate is presently 6% and the market risk premium is 5%. What is the value of Western to Pizza Palace?
