Question

Question Greer Company has plans to acquire Holt Company by exchanging stock. Greer will Issue 1.5 Shares of its stock for each na Share of Holt financial Information for the two companies is as follows; and Greer Holt root Net Income $400, ao $100, AD Shares outstanding 200,000 25,000 Earnings per Share on $2.00 $4.00 Market price of stuck $40.00 $48-00 Greer expects the ple Ratio for the combined Campany to be is. Required a) Calculate Combined Eps [4 marks] b). What is the expected stock price? (3 marks ) What is the difference between a primary market and a secondary market? [2 marks?

corporate finance

kindly show manual calculations.

Answer 1

Workings Net Income A Shares Outstanding B Earnings Per Share C= A/B Market Price/ Share D P/E E=D/C Greei $ 400,000.00 200,000 2.00 40.00 20 Holt $100,000.00 25,000 4.00 48.00 12 III for III New Greei Workings $ 500,000.00 1 + || 237,500 1 +11*1.5 2.11 31.58 D=E*C 15 Answers: a) Combined EPS as in (C) above $ 2.11 b) Expected Stock Price as in (D) above $ 31.58 C) Difference between Primary Market and Secondary Market Primary Market Secondary Market Initial Public Offer Buying & Selling exising stock at the stock exchange investors buy and sell the securities Company Directly sells to the investors among themselves at the exchange Company is the beneficiary Investor is the beneficiary Underwriters are the intermediaries in the Here the intermediaries are the primary market. brokers. It is sold at the price fixed by the Company Buying & Selling at the best price for the trade.