Danger earnings per share be after combination

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Reference no: EM133305436

Question 1.

The shareholders of Péril voted in favor of an offer of takeover from the Danger company. Here is information on each of the companies.

Peril Danger

Price-earnings ratio 3.5 14

Shares outstanding 40,000 120,000

Profits $200,000 $450,000

Peril shareholders raise one Danger action for each set of three shares of Peril they hold.

a. What will Danger's earnings per share be after the combination? What will be the price-earnings ratio if the NPV of the acquisition is zero?

b. In the danger opinion, what should be the value of the synergy between the two businesses? Explain how it is possible to reconcile your answer with the decision of two companies to merge.

Reference no: EM133305436

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