Solution-What is the gain from the acquisition

What is the gain from the acquisition

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Reference no: EM133204962

As the manager of Company A, you are investigating the possible acquisition of Company B. You have the following basic data:

	Company A	Company B
Earnings per share	$6.00	$2.50
Dividend per share	$3.00	$0.80
Number of shares	1,000,000	600,000
Stock price	$90	$20

You estimate that investors currently expect a steady growth of about 7% in Company B's earnings and dividends. Under new management this growth rate would be increased to 8% per year, without any additional capital investment required.

Required:

(a) What is the gain from the acquisition?

(b) What is the cost of the acquisition if Company A pays $25 per share of Company B?

(d) How would the cost of the cash offer and the share offer alter if the expected growth rate of Company B were not changed by the merger?

Reference no: EM133204962

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What is the gain from the acquisition

Reference no: EM133204962

Reference no: EM133204962

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