Compare to? targetco premerger? pe ratio

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Your company has earnings per share of $4.33. It has 1.8 million shares? outstanding, each of which has a price of $43. You are thinking of buying? TargetCo, which has earnings per share of $2.17?, 1.9 million shares? outstanding, and a price per share of $26. You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction.

a. If you pay no premium to buy? TargetCo, what will your earnings per share be after the? merger?

b. Suppose you offer an exchange ratio such? that, at current? pre-announcement share prices for both? firms, the offer represents a 25% premium to buy TargetCo. What will your earnings per share be after the? merger?

c. What explains the change in earnings per share in part ?(a?)? Are your shareholders any better or worse? off?

d. What will your? price-earnings ratio be after the merger? (if you pay no? premium)? How does this compare to your? P/E ratio before the? merger? How does this compare to? TargetCo's premerger? P/E ratio?

Reference no: EM132670137

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