Assume it no longer pays a dividend

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Reference no: EM131462088

Suppose Company XYZ is considering purchasing shares of Company ABC. ABC has 30 million shares outstanding and trades at $60 per share on January 1, 2015. ABC shares trade at $62 per share as of December 31, 2015 and pay a dividend of $1 per share in 2015. Net income of ABC for 2015 is $4 per share ($120 million in total).

On January 1, 2010, XYZ purchases 25 million shares of ABC for $1.5 billion in cash. Assume that ABC still earns $120 million, but assume it no longer pays a dividend. (Ignore any effects on total assets for this problem).

Effect on 2015:

Pretax Income: $____________ Total Shareholder’s Equity: $____________

Reference no: EM131462088

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