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Determine the market value of the merged firm

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Reference no: EM132174353

Question - MERGER & ACQUISITION

Company A wants to acquire Company T by exchanging 0.5 of its shares for each share of Company T. Relevant financial data are as follows:

 

Co. A

Co. B

EAT

1800000

$360000

Equity Shares Outstanding

600000

180000

EPS

$5

$2

P/E Ratio

10 times

7 times

Market price per share

$30 ($3x10)

$14 ($2x7)

Required -

1) The number of equity shares required to be issued by Co. A for acquisition of Co. T.

2) What is the EPS OF Co A after the acquisition?

3) Determine the equivalent earnings per share of Co. T.

4) What is the expected market price per share of Co. A after the acquisition, assuming its P/E multiple remains unchanged?

5) Determine the market value of the merged firm.

Reference no: EM132174353

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