just need part d please show equations
Part d)
i) Value of the acquirer pre merger
= market price per share * no. of shares outstanding of acquirer
= $ 40 * 1 million = $ 40 million
ii) Value of the target pre merger
= market price per share * no. of shares outstanding of target
= $ 25 * 1 million = $ 25 million
iii) total equity value after merger
= Market price per share * (no. of shares outstanding of acquirer + no. of shares issued to Target)
= $40 * (1 million + { 1 million * (2/4)})
= $40 * 1.5 million shares
= $ 60 million
1a)Stock price after merger,
Earning per share after merger
= Total earnings / after merger no. of shares outstanding
= ( {$4 * 1 million shares of acquirer} + {$2 * 1 million shares of target}) / ( 1 million shares of acquirer + { 1 million shares of target * exchange ratio 2/4}
= $ 6 million / 1.5 million after merger shares
= $ 4
P/E ratio after merger = stock price after merger / earnings per share after merger
Therefore stock price after merger = earning per share after merger * PE ratio after merger
= $4 * 10
= $ 40
1b) P/E ratio after merger = Earnings per share / stock price after merger
= $40 / $ 4
= 10 times
1c) P/E ratio of acquirer pre merger
= $40 / $ 4
= 10 times
1d) P/E ratio of target pre merger
= $ 25 / $2
= 12.50 times
There is no change in the P/E ratio of pre merger and after merger since the exchange ratio of merger is calculated based on the earnings per share
just need part d please show equations Your company has earnings per share of $4. It...
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