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Find cost of the merger if merged firm is worth given amount

Consider the following information for two all equity firms, A and B:

	Firm A	Firm B
Total earnings	$3,000	$1,100
Shares outstanding	600	400
Price per share	$ 70	$ 15

Firm A is acquiring Firm B by exchanging 100 of its shares for all the shares in B. What is the cost of the merger if the merged firm is worth $63,000? What will happen to Firm A's EPS? Its PE ratio?

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Finance Basics: Find cost of the merger if merged firm is worth given amount

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Find cost of the merger if merged firm is worth given amount

Reference No:- TGS0557066

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : Determine the absorption costing and variable costing

Q : Should firm proceed to estimate value of synergistic benefit

Q : Car wash partners questions

Q : Determine the account balances for hulse company

Q : Find cost of the merger if merged firm is worth given amount

Q : Final step of screening process

Q : Financial policies and strategies

Q : How the futa tax is computed by the wage-bracket table

Q : Find the break-even level of earnings before interest

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Find cost of the merger if merged firm is worth given amount

Reference No:- TGS0557066

Recent Questions Asked Finance Basics

Q : Determine the absorption costing and variable costing

Q : Should firm proceed to estimate value of synergistic benefit

Q : Car wash partners questions

Q : Determine the account balances for hulse company

Q : Find cost of the merger if merged firm is worth given amount

Q : Final step of screening process

Q : Financial policies and strategies

Q : How the futa tax is computed by the wage-bracket table

Q : Find the break-even level of earnings before interest

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