What is the expected gain from the acquisition

Assignment Help Financial Management

Reference no: EM131869331

D Medical (DM), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Arlington Corporation, a young firm with a high growth rate of earnings. The acquisitions analysis group at DM has produced the following table of relevant data:

DMedical Arlington

Earnings per share $3.00 $2.00

Dividend pers share $3.00 $ .80

Number of shares 200 million 10 million

Stock price $30 $20

DM's analysts estimate that investors currently expect growth of about 6% per year in Arlington's earnings and dividends. They assume that with the improvements in management that DM could bring to Arlington, its growth rate would be 10% per year beginning one year from now with no additional investment outlays beyond those already expected.

What is the expected gain from the acquisition?

What is the net present value (NPV) of the acquisition to DM shareholders if it costs an average $30 per share to acquire all of the outstanding shares? -

Would it matter to DM's shareholders whether the shares of Arlington stock are acquired by paying cash or DM stock?

Reference no: EM131869331

Questions Cloud

Entrepreneur-entrepreneurship and entrepreneurial marketing : Locate, examine, and discuss multiple different definitions and descriptions that exist for entrepreneur, entrepreneurship, and entrepreneurial marketing.

Discuss the current medications used to treat disorders : Discuss the current medications used to treat both disorders and the pharmacologic actions the medications have in altering the pathophysiology.

What is the total annual cost for option : What is the total annual cost for Option 2? Please complete the income statement for RFC based on option 2. (Handwritten for the income statement is okay

Examine the succession planning process : With so many technological tools available, it can be overwhelming to identify the most applicable systems and packages for a specific organization's succession

What is the expected gain from the acquisition : What is the expected gain from the acquisition? What is the net present value (NPV) of the acquisition to DM shareholders.

What is the price per share of equity under plan : What is the price per share of equity under Plan I?

Determine the barriers to implementation of the solution : Determine the barriers to implementation of the solution. Analyze the options being discussed for public and/or private funding.

Difference between the balance and the market value : What is the difference between the balance and the market value of the loan after 36 monthly payments if the interest rises to 5%?

How engagement plays a role in classroom management : How you will use classroom management strategies to meet the diverse needs of students, achieve instructional goals, and effectively involve families.

User Account

All Pages