What is the expected price-to-earnings ratio

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Question - 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 $34.02 and the share price for Value Co is $10.89. The price-to-earnings ratio for Pinder Ltd is 10.68 and the price-to-earnings ratio for Value Co is 4.88. The number of shares outstanding for Pinder Ltd is 456,115 and the number of shares outstanding for Value Co is 219,806. 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?

Reference no: EM133053269

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