CONNECT 1 SEMESTER ACCESS CARD FOR CORPORATE FINANCE
11th Edition
ISBN: 9781259298738
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor
Publisher: McGraw-Hill Education
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Question
Chapter 29, Problem 10QP
a.
Summary Introduction
To calculate:-The EPS of Firm A after the merger.
Merger:
Merger occurs when the shareholders of two or more companies pool the resources of their company into one separate legal entity and as a result a new company comes into existence. Merger is basically the result of merge the two or more companies into one.
Synergy:
Synergy is a state in which two or more companies are combined and perform better than the sum of their individual results in terms of productivity and revenue.
Purchase Accounting Method for Mergers:
In the purchase accounting method the assets of the targeted company has to be recorded into the current market value in the books of acquiring company and
Net present value is one of the techniques of capital budgeting. Net present value is used to find out the difference between the present value of
Price Earnings Ratio (PE ratio):
Price to earnings ratio is a ratio to calculate the share price related to net income earned by a firm per share annually.
Earnings per Share (EPS):
Earnings per share are a ratio to calculate the earning earned per share by the shareholders.
b.
Summary Introduction
To calculate:-Firm A’s price for a share after merger if the market wrongly analyzes this reported earnings growth.
c.
Summary Introduction
To calculate:-Price-earnings ratio of the post merger firm if the market correctly analyzes the transaction
d.
Summary Introduction
To calculate:-The share price of firm A after the merger if there is no synergy gain, to calculate the P/E ratio and to explain the share price is too high or too low
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Students have asked these similar questions
Consider the following premerger information about Firm X and Firm Y: Firm X Firm Y Total earnings $ 40,000 $ 15,000 Shares outstanding 20,000 20,000 Per-share values: Market $ 49 $ 18 Book $ 20 $ 7 Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $4 per share. Assuming that neither firm has any debt before or after the merger, what are the total assets of Firm X after the merger?
Consider the following premerger information about Firm X and Firm Y:
Firm X
Firm Y
Total earnings
$
95,000
$
22,000
Shares outstanding
52,000
17,000
Pre-share values:
Market
$
52
$
21
Book
$
15
$
10
Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $6 per share, and that neither firm has any debt before or after the merger.
a.
Assuming the pooling of interests method is used, what is the equity of the combined firm?
Equity value
$
b.
List the assets of the combined firm assuming the purchase accounting method is used.
Assets from X
$
Assets from Y
Goodwill
Total Assets XY
$
Please dont provide solution image based thnx
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 $
Chapter 29 Solutions
CONNECT 1 SEMESTER ACCESS CARD FOR CORPORATE FINANCE
Ch. 29 - Prob. 1CQCh. 29 - Prob. 2CQCh. 29 - Prob. 3CQCh. 29 - Prob. 4CQCh. 29 - Prob. 5CQCh. 29 - Prob. 6CQCh. 29 - Economies of Scale What does it mean to say that a...Ch. 29 - Prob. 8CQCh. 29 - Prob. 9CQCh. 29 - Prob. 10CQ
Ch. 29 - Prob. 1QPCh. 29 - Prob. 2QPCh. 29 - Prob. 3QPCh. 29 - Prob. 4QPCh. 29 - Cash versus Stock Payment Penn Corp. is analyzing...Ch. 29 - EPS, PE, and Mergers The shareholders of Flannery...Ch. 29 - Prob. 7QPCh. 29 - Cash versus Stock as Payment Consider the...Ch. 29 - Prob. 9QPCh. 29 - Prob. 10QPCh. 29 - Prob. 11QPCh. 29 - Prob. 12QPCh. 29 - Prob. 13QPCh. 29 - Prob. 14QPCh. 29 - Prob. 15QPCh. 29 - Prob. 16QPCh. 29 - Prob. 1MCCh. 29 - Prob. 2MCCh. 29 - Prob. 3MCCh. 29 - Prob. 4MC
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