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What is the cost of the acquisition to a

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Reference no: EM132564894

Company A is determined to report earnings per share of 267p. It therefore acquires Company B. There are no gains associated with the acquisition. In exchange for B's shares, A issues just enough of its own shares to ensure its 267p earnings per share objective.

Please find the following information:

Earnings Per Share: A: £2.00 B: £2.50

Price per Share A: £40 B: £25

Price-Earnings Ratio A: 20 B: 10

Number of Shares A:100,000 B:200,000

Earnings A:£200,000 B:£500,000

Market Value A:£4,000,000 B:£5,000,000

Required:

a) How many shares in the combined firm have to be offered for each share in B?

b) Derive the earnings per share, price per share, price-earnings ratio, earnings, and market value associated with the combined firm.

c) What is the cost of the acquisition to A?

d) What is the change in the market value of A's shares that were outstanding before the acquisition?

Reference no: EM132564894

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