What would be the new share price of the merged company

Assignment Help Financial Accounting
Reference no: EM133022281

Question - Agrico is considering the acquisition of Thompson. Agrico has two million shares outstanding selling at R30, or 7.5 times its earnings per share, and Thompson has one million shares outstanding selling at R15, or five times its earnings per share. Agrico would offer to exchange two shares of Thompson for one share of Agrico.

1. If there would be no wealth created from the merger, what would be the earnings per share of the merged company? Its price-to-earnings (P/E) ratio? Its share price? Would there be any wealth transfer between the shareholders of the two companies?

2. Suppose that, after the merger, the market would not adjust the P/E ratio of Agrico, which will stay at 7.5. What would be the new share price of the merged company? Would there be any wealth transfer between the shareholders of the two companies?

Reference no: EM133022281

Questions Cloud

Calculate degree of leverage : Calculate degree of leverage [DOL] and if sales increases by 25%, what will be the increase or decrease in net income in $ of this company
Find its most recent annual report on the website : Find its most recent Annual Report on the website. Download it from the website and upload it to our discussion thread there.
Requirements of potential customers of a business : Consider the requirements of potential customers of a business currently work for or would like to work for in the future. Which of the statements do identify a
What is the total contribution margin on the flexible budget : Question - The static budget was prepared based on a sales level of 18,000 units. What is the total contribution margin on the flexible budget
What would be the new share price of the merged company : Suppose that, after the merger, the market would not adjust the P/E ratio of Agrico, which will stay at 7.5. What would be the new share price of merged company
Aspects of a corporate or organizational culture : List five aspects of a corporate or organizational culture.
Government from spending money on imported goods : During the passage of the U.S. fiscal stimulus bill of February 2009, many members of Congress demanded "buy American" clauses, which would have prevented the g
What is the value of walton the stock : The company's dividend is expected to grow at a rate of 0.22 this year, 0.11, next year, What is the value of Walton the stock
Should the dividend be booked to net income or OCI : Mandy declared a dividend of $1.50 per share on April 1, 2018. Prepare the journal entry. Should the dividend be booked to net income or OCI

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd