Wilson Industries is considering the acquisition of the Blanchard Company in a stock-for-stock exchange. Selected financial data for the two companies are shown next.An immediate synergistic earnings benefit of $3 million is expected in this merger, due to cost savings.Sales (millions)Earnings after taxes (millions)Common shares outstanding(millions)Earnings per shareDividends per shareCommon stock (price per share)$+AWilson$84$218$ 2.625$ 2.00$34Blanchard$74$9.06Calculate the postmerger earnings per share if the Blanchard shareholders accept an offer of $19 per share in a stock-for-stock exchange. Round your answer to thenearest cent.$1.50$ 1.10$15.00

In order to determine the earning per share, the earning available to equity shareholders are…

Answered: Wilson Industries is considering the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter23: Corporate Restructuring

Section: Chapter Questions

Problem 7P

See similar textbooks

Similar questions

Linpro Industries is considering the acquisition of Odetics Inc. in a stock-for-stock exchange. Assume no immediate synergistic benefits are expected. Selected financial data on the two companies are shown below: Linpro Odetics Sales (millions) $480 $90 Net income (millions) $38 $10.4 Common shares outstanding (millions) 10 2.1 Earnings per share $3.80 $4.95 Common stock (price per share) $45.60 $74.25 Calculate Linpro's post-merger EPS if the Odetics shareholders accept an offer of $90 a share in a stock-for-stock exchange. Question 9Answer a. $4.38 b. $3.81 c. $4.29 d. $3.42
Dongle Corp. is analysing an acquisition of Tingle Inc. Dongle has 10 million shares outstanding, which sell for $40 each. Tingle has 5 million shares outstanding, which sell for $20 each. The merger gains are estimated at $25 million. If Dongle Corp. has a price-earnings ratio of 12 and Tingle has a P/E ratio of 8, what should be the P/E ratio of the merged firm? Assume in this case that the merger is financed by an issue of new Dongle Corp. shares. Tingle will get one Dongle share for every two Tingle shares held. (Do not round intermediate calculations. Round your answer to 2 decimal places.) P/E 18.14
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 5.26 21.04 Shares outstanding 57,000 228,000 Earnings $ 205,000 $ 1,025,000 Bread's shareholders will receive one share of Butter stock for every five shares they hold in Bread. What will the EPS of Butter be after the merger? What will the PE ratio be if the NPV of the acquisition is zero?
Nataro, Inc is planning on merging with Celestia Corp. Nataro, Inc with will pay shareholders the current value of their stock using shares of Nataro as the form of payment. Nataro has 5600 shares outstanding at a market price of $27.25 per share. Celestia Corp has 8,000 shares outstanding at a market price of $5.75 per share. The expected synergy created by the merger is $4200. What is the value of the merged firm (excludes cost of acquisition)? A. 205600 B. 201400 C. 159600 D. 54400 E. 68750
Both of Firm A and Firm B are 100 equity firms. You estimate that the incremental value of the acquisition is $100,000. Firm B has indicated that it will agree to a sale if the price is $150,000, payable in cash or stock. Firm B is worth $100 as a stand-alone, so this is the minimum value that we could assign to Firm B. Calculate the value of firm A after merger. Firm A Firm B Price per share $2 $1 Number of shares 50,000 100,0000
Suppose that Flight Centre has made an offer for Webjet that consists of the cash purchase of 1.4 million shares at $13 per share. The value of Webjet’s stock before the bid was made public was $11 per share. Flight Centre’s stock is trading at $20 per share, and there are 20 million shares outstanding. Flight Centre estimates that the merger synergy will be $3.5 million per year, forever. The appropriate discount rate for these gains is 12%. What is the estimated value of the Flight Centre post-merger?
1)A Bhd is planning to take over B Bhd. The growth rate of BBhd is 5% in earnings and dividends. A Bhd believes it couldincrease B Bhd growth rate to 7% per year. Using the above data, calculate i)Gain from acquisition ii)cost of acquisition if A Bhd pays $15 in cash for each share of B Bhd iii)P/E of the merged entity
Denali Inc. is acquiring Whitney Corp. at an exchange ratio of 2:1. After the deal is announced, Denali’s stock price is $25 and Whitney’s stock price is $47. Create a trade that would take advantage of the merger arbitrage opportunity, starting with 100 shares of Whitney’s stock. Show in detail the profit from your portfolio if between today and the deal being completed, Denali’s stock price falls to $20.
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: BreadButterPrice-earnings ratio1023Shares outstanding75,000260,000Earnings$ 230,000$ 1,040,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1.What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2.What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b.What must Butter feel is the value of the synergy between these two firms?
Tom Corporation is considering the acquisition of Jerry Corporation. Jerry Corporation has free cash flows to debt and equity holders of $3,750,000. If Tom Corporations acquires Jerry Corporation, Jerry will reduce operating costs by $1,500,000. This will increase free cash flow to $4,900,000. Assume that cash flows occur at year-end and the weighted average cost of capital is 9%. a. What is the value of Jerry Corporation without a merger? o. What is the value of Jerry Corporation with the merger?
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 7.2 14.4 Shares outstanding 73,000 146,000 Earnings $ 210,000 $ 630,000 Bread’s shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms?
The shareholders of Bread Company have voted in favor of a buyout offer from Butter Corporation. Information about each firm is given here: Bread Butter Price-earnings ratio 16 23 Shares outstanding 96,000 230,000 Earnings $ 180,000 $ 900,000 Bread's shareholders will receive one share of Butter stock for every three shares they hold in Bread. a-1. What will the EPS of Butter be after the merger? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a-2. What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What must Butter feel is the value of the synergy between these two firms? a-1. EPS a-2. PE b. Synergy value

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS