The shareholders of Northstar Corp. have voted in favour of a buyout offer from Allarco Inc. Information about each firm is given here:
Northstar Corp.Allarco Inc.Price-earning ratio4.8016Shares outstanding72,000150,000Earnings$240,000$720,000
Northstar Corp.'s shareholders will receive two shares of Allarco Inc. stock for every three shares they hold in Northstar Corp.
Note: Please make sure your final answers are accurate to 2 decimal places.
a) What will EPS of Allarco Inc. be after the merger?
EPS = $
b) What is the stock price of Allarco Inc. before the merger?
Stock price = $
c) What will the PE ratio be if the NPV of the acquisition is zero?
PE ratio =
d) What must Allarco Inc. feel is the value of the synergy between these two firms?
Synergy = $