Question

Gueshon 1 Corparation full- time has agreed do pey Corparaton Distance at dhe darget Current market m fhe form of dhe acquurer's Share Yalue Both Companies are all equity Ananced and the expected incre mendal Valie 1s expected to be 2S,co0 The financial oatath r loot Companies befve Ahe merger is as presented be(ow rom the merger Corpar adon Corparato'n MIl-Time COT p DIstance umbtr out Standing share Ehares 10,000 Price per ka s anungs per share price Ranings Ratio Required (a)Calculate dee post Merger Market ( Compute the price Carnungs ratio af ter the merger Defeimine the NpV of fhe KI-ST 12 price per share merge and State rea son Whether the me rger basis Fhat worte while do happen on

corporate finance

kindly show manual workings, not excel calculator

Answer 1

full-time 25 IS Corporation Corporation Distance nloods oLs Shares 2S000 10000 Price I Shane Value of firm's 625000 1, S2000 EPS 2.5 IS Tato Gofal Earrings 62.500 15000 Post merger Gran al. Post merger market Price / Share I value of full time + value of Distance + sy Total alact Shanes 625.000+ 150.000 + 25000 25.000+ 10000 8,0gooo - 35000 = 2286 Ootal Earrings - 62500 + 15000 Post merger EPS = Gohl nad Shame 25000 +10000 - 221. Post mes b) post merger PE Ratio - FR 22.86 - 10.34 o alpy of merger- tatlows-Out Hows - 10000 15 + 2.5000 - 10000 XIS shanes) (mps) (Synergy) Cout How) 25000 Nade: Ansurning entine Synergy effect is due to Distance et alpy of merger is just be negative then merger is oot acceptable