Explain the expected price-to-earnings ratio

Assignment Help Finance Basics
Reference no: EM133062498

Pinder Ltd is considering a merger with Value Co, where Pinder Ltd will issue 2 of its own shares for 5 shares of Value Co. The share price for Pinder Ltd is $34.91 and the share price for Value Co is $10.20. The price-to-earnings ratio for Pinder Ltd is 10.40 and the price-to-earnings ratio for Value Co is 5.37. The number of shares outstanding for Pinder Ltd is 480,652 and the number of shares outstanding for Value Co is 215,314. There are no operational synergies expected from the merger, but Pinder Ltd believes that the Value Co was undervalued by the market due the lack of investor relations management, and that once it is included as part of Pinder Ltd, that Value Co's business would be valued 50% higher in terms of price or the price-to-earnings ratios. Based only on the information above, what is the expected price-to-earnings ratio of the combined firm if Pinder Ltd's beliefs are correct? (round to the nearest two decimal places)

Reference no: EM133062498

Questions Cloud

What amount of interest expense should be reported : On January 1, 20X3, Scarf sold bonds with par value of $667,500 at 98. Purse purchased $445,000 par value of the bonds; What amount of interest expense reported
What are the tax consequences of the compensation receipts : What are the tax consequences of the compensation receipts and What are the tax consequences of the compensation receipt
Learned about risk and return : In your first job as a security analyst, you are asked to compare the following securities:
What is the annual cost : Assuming a 365-day year, what is the annual cost (%), in 4 decimal places, of forgoing a cash discount under the terms of sale 4/20, n/60
Explain the expected price-to-earnings ratio : Pinder Ltd is considering a merger with Value Co, where Pinder Ltd will issue 2 of its own shares for 5 shares of Value Co. The share price for Pinder Ltd is $3
Advise new developments and rumpole richardson : Advise New Developments and Rumpole Richardson of their GST obligations and any input tax credit entitlements they may have. Assume that New Developments
What is the maximum exchange ratio : Pinder Ltd has announced a scrip(stock) offer to acquire Value Co. Pinder Ltd's shares are trading at $13 and there are 2 million shares of outstanding.
What is the expected share price of pinder ltd : Pinder Ltd is currently trading at $15 per share and is planning on a dividend of $2 per share. The capital gains tax and dividend income tax for Pinder Ltd's s
What is the current share price for the stock : Universal Laser Inc. just paid a dividend of $3.25 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year, indefinitely.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the modified internal rate of return

Will Manning accept the project if the firm uses i ie NPV rule explain?

  Residual payout policy and managed payout policy

Explain the meaning of the terms "residual payout policy" and "managed payout policy". Does the empirical evidence suggest that U.S. and European companies follow a residual or a managed payout policy?

  Foreign currency exchange rate determination

One British pound can buy 1.62 U.S. dollars today in foreign exchange market and currency forecasters predict that U.S. dollar will depreciate by 12 percent against the pound over next 30 days.

  What is the most expensive car you can afford

What is the most expensive car you can afford if you finance it for 48 months?

  What amount will be shown as a short-term gain

In 2009, Juanita sold stock considered short-term for a gain of $875. and stock considered long term for a loss of $2,400. She also had a $2,000 short term loss caryover from 2008 and a $240. long-term loss carryover from 2008.

  Financial statement information for amaryliss corporation

1. Consider the following financial statement information for the Amaryliss Corporation:

  Describe the efforts to attract industry

Do you see any dangers in the fact that, in their efforts to attract industry, various Canadian provinces may be in direct competition with each other?

  Compute change in the bond price in percentage

A $2,900 face value corporate bond with a 6.8 percent coupon (paid semiannually) has 12 years left to maturity. It has had a credit rating of BBB.

  Contrast mcgregor theory x and theory y assumptions

McGregor developed Theory Y and Theory X. These define how managers view their employees. This was not covered in the lesson. Research about McGregor's theory a

  Objective of the federal government

"Originally, the sole objective of the federal government in taxing income was to generate financing for government expenditures. Although this purpose continues to be important, social and economic objectives have been added." Substantiate the st..

  Compute each project payback period

Suzaki Manufacturing Corporation is planning three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows.

  Weekly tasks or assignments individual or group projects

weekly tasks or assignments individual or group projects will be due by monday and late submissions will be assigned a

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd