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Your company has earnings per share of $4. It has 1 million shares outstanding, each of which has a price of $40. You are thinking of buying Target Co, which has earnings per share of $2, 1 million shares outstanding, and a price per share of $25. You will pay for Target Co by issuing new shares. There are no expected synergies from the transaction.
a. If you pay no premium to buy Target Co, what will your earnings per share be after the merger?
b. Suppose you offer an exchange ratio such that, at current preannouncement share prices for both firms, the offer represents a 20% premium to buy TargetCo. What will your earnings per share be after the merger?
c. What explains the change in earnings per share in part (a)? Are your shareholders any better or worse off?
d. What will your price-earnings ratio be after the merger (if you pay no premium)? How does this compare to your P/E ratio before the merger? How does this compare to Target Co's premerger P/E ratio?
Bubba's Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours. For the current year, overhead is estimated at $1,150,000, and direct labor hours are budgeted at 162,000 hours.
Journalize the entry to record the following selected transactions of Oliver Co. Purchased $10,000 of Kruse Co. 8% bonds at 102 plus accrued interest of $2,000.
Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decre..
What percentage of istock s needed to have one of her friends elected under the cumulative voting rule? (Do not round intermediate calculations and round your final answer to 2 decimal places.
What is the normal due date for the tax return of calendar-year taxpayers? What happens to the due date if it falls on a Saturday, Sunday, or holiday?
They take turns paying for the group's lunch. Since they all do business with each other, each claims an entertainment expense deduction for the amount he or she paid for the lunches. Evaluate this practice.
Prepare the appropriate eliminating entries for this transaction which would appear on the year-end December 31, 2005 worksheet.
At the current product mix, how many bottles of Shiny Coat and Flea-B-Gone must the Doggy Palace sell in a year in order to earn a profit of $25,000? (number of each)
Cypress Corporation has regular taxable income of $170,000 (assume annual gross receipts are greater than $5 million) and regular tax liability of $49,550 for 2010.
The auditors compare information on canceled checks with information contained in the cash disbursement journal. The objective of this test is to determine that:
Williams, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client's population of 3000 accounts. He calculated a sampling interval of $5,000 and the tol..
Greenbacks Bank also gave Doug and Pattie a cellular phone (worth $100) for opening the savings account. What amount of interest income should they report on their joint income tax return?
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