Solution-Are they better or worse off than they were before

Are they better or worse off than they were before merger

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Reference no: EM132174284

QUESTION - MERGER & ACQUISITION

The following data concerns to companies X & Y:

	Company X	Company Y
Earnings after taxes	$140000	$37500
Equity shares outstanding	20000	75000
EPS	$7	$5
P/E Ratio	10	8
Market Price	$70	$40

Company X is the acquiring company, exchanging its one share for every 1.5 shares of Company Y. Assume that Company X expects to have the same earnings and P/E ratio after the merger as before (no synergy effect), show the extent of gain accruing to the shareholders of two companies as a result of merger. Are they better or worse off than they were before the merger?

Reference no: EM132174284

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Are they better or worse off than they were before merger

Reference no: EM132174284

Reference no: EM132174284

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