Question

The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation....

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 9.9 30 Shares outstanding 99,000 300,000 Earnings $ 250,000 $ 750,000 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?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following premerger information about Firm A and Firm B: Firm A Firm B   Total...
Consider the following premerger information about Firm A and Firm B: Firm A Firm B   Total earnings $ 2,300 $ 700   Shares outstanding 1,000 200   Price per share $ 25 $ 29 Assume that Firm A acquires Firm B via an exchange of stock at a price of $31 for each share of B's stock. Both Firm A and Firm B have no debt outstanding. a. What will the earnings per share (EPS) of Firm A be after the merger?...
Campbell Corporation is evaluating an extra dividend versus a share repurchase. In either case, $19,000 would...
Campbell Corporation is evaluating an extra dividend versus a share repurchase. In either case, $19,000 would be spent. Current earnings are $1.60 per share, and the stock currently sells for $50 per share. There are 2,500 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,...
Ames, Inc., has a current stock price of $44.50. For the past year, the company had...
Ames, Inc., has a current stock price of $44.50. For the past year, the company had net income of $6,400,000, total equity of $21,610,000, sales of $39,300,000, and 4.4 million shares of stock outstanding. What are earnings per share (EPS)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Earnings per share [] $ What is the price?earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)...
Ames, Inc., has a current stock price of $43.00. For the past year, the company had...
Ames, Inc., has a current stock price of $43.00. For the past year, the company had net income of $6,550,000, total equity of $21,640,000, sales of $39,600,000, and 4.7 million shares of stock outstanding. What are earnings per share (EPS)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Earnings per share            $ What is the price?earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price?earnings...
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $952,000. Without...
Consider Pacific Energy Company and U.S. Bluechips, Inc., both of which reported earnings of $952,000. Without new projects, both firms will continue to generate earnings of $952,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 12 percent. a. What is the current PE ratio for each company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) PE ratio ______ times b. Pacific Energy Company...
Awake Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would...
Awake Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would be spent. Current earnings are $2.00 per share, and the stock currently sells for $50 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,...
Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $963,000. Without...
Consider Pacific Energy Company and Atlantic Energy, Inc., both of which reported earnings of $963,000. Without new projects, both firms will continue to generate earnings of $963,000 in perpetuity. Assume that all earnings are paid as dividends and that both firms require a return of 13 percent.    a. What is the current PE ratio for each company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Pacific Energy Company has a new...
Awake Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would...
Awake Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would be spent. Current earnings are $1.60 per share, and the stock currently sells for $56 per share. There are 3,500 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. Extra dividends and repurchase (Do not round intermediate calculations and round your answers to...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price $ 90 Number of shares 25,000 Total assets $ 7,700,000 Total liabilities $ 3,700,000 Net income $ 640,000 MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $700,000, and it will be financed with a new equity issue. The return on the investment will equal...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information...
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price $ 79 Number of shares 20,000 Total assets $ 4,500,000 Total liabilities $ 2,500,000 Net income $ 520,000 MHMM is considering an investment that has the same PE ratio as the firm. The cost of the investment is $600,000, and it will be financed with a new equity issue. The return on the investment will equal...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT