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

A company buys another company in order to take advantage of the synergy of finance, resources,…

Answered: The shareholders of Bread Company have…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 11P

See similar textbooks

Related questions

Question

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

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

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