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Compute the accretion and dilution per share

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Reference no: EM132772074

Question - Acquirer purchases 100% of target by issuing additional stock to purchase target shares

No premium is offered above target's current share price

Given:

Acquirer Target

Share Price P20 P40

P/E ratio 8x 5x

EPS Next Year P3 P6

Shares Outstanding 6000 2000

Requirements -

1. Compute the accretion/dilution per share.

2. Compute the accretion/dilution in %.

3. What is the result of the deal?

4. Is target company expensive to purchase? Why?

Reference no: EM132772074

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