Reference no: EM132990330

The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are as follows:

                                                                              A-Rod Corp.               Jeter Corp.
Total earnings                                             $660,000                    $3,500,000
Number of shares of stock outstanding               275,000                    1,750,000
Earnings per share                                              $2.40                        $2.00
Price-earnings ratio (P/E)                                        15                            18
Market price per share                                              $36                        $36

Problem a. The Jeter Corp. is going to give A-Rod Corp. a 50 percent premium over A-Rod's current market value. What price will it pay? (Do not round intermediate calculations and round your answer to the nearest whole number.)

Problem b. At the price computed in part a, what is the total market value of A-Rod Corp.? (Use the number of A-Rod Corp. shares times price.) (Do not round intermediate calculations and round your answer to the nearest whole number.)

Problem c. At the price computed in part a, what is the P/E ratio Jeter Corp. is assigning A-Rod Corp? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Problem d. How many shares must Jeter Corp. issue to buy the A-Rod Corp. at the total value computed in part b? (Do not round intermediate calculations and round your answer to the nearest whole number.)

Problem e. Given the answer to part d, how many shares will Jeter Corp. have after the merger? (Do not round intermediate calculations and round your answer to the nearest whole number.)

Problem f. What are the new postmerger earnings per share? (Do not round intermediate calculations and round your answer to 2 decimal places.)