Firm B is The Bidding Firm and Firm T is the Target Firm.Their financial data is...

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Finance

Firm B is The Bidding Firm and Firm T is the Target Firm.Theirfinancial data is as follows:
item Firm B Firm T
Total earning (E) US $10 million US $5 Million
Number of outstanding shares(s) 5 Million 5 Million
Earnings per share (EPS) US$2 US$1
P/E ratio 6 4
Market Price per share (P) US$12 US$4
(A) calculate the weighted average weighted average P/Efor the combined Firm BT.
(B)Calculate the Maxium number of shares firm B will bewilling to offer to the sockholders of firm T at the P/E calculatedin Part (A) above.What will be the minimum number of sharesacceptable to the stockholders of firm T at the same P/Elevel?
(C) If EPS was the criterion to determine the exchangeratio,how many shares firm B would offer to stockholders of firmT?in case,Market price per share was used as a basis to determinethe exchange ratio,how much would your result change?which one doyou think would be a better criterion for exchange ratedetermination?why?

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4.2 Ratings (864 Votes)

AComputing the combined PE ratio of BT PE of BEarings of BEarnings of BTPE of TEarnings of TEarnings of BT PEBT PEBEBEBTPETETEBT PEBT 610millions15millions45million15million 4133333 533 BCalculating the maximum no of shares that the B See Answer

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Firm B is The Bidding Firm and Firm T is the Target Firm.Theirfinancial data is as follows:itemFirm BFirm TTotal earning (E)US $10 millionUS $5 MillionNumber of outstanding shares(s)5 Million5 MillionEarnings per share (EPS)US$2US$1P/E ratio64Market Price per share (P)US$12US$4(A) calculate the weighted average weighted average P/Efor the combined Firm BT.(B)Calculate the Maxium number of shares firm B will bewilling to offer to the sockholders of firm T at the P/E calculatedin Part (A) above.What will be the minimum number of sharesacceptable to the stockholders of firm T at the same P/Elevel?(C) If EPS was the criterion to determine the exchangeratio,how many shares firm B would offer to stockholders of firmT?in case,Market price per share was used as a basis to determinethe exchange ratio,how much would your result change?which one doyou think would be a better criterion for exchange ratedetermination?why?

item	Firm B	Firm T
Total earning (E)	US $10 million	US $5 Million
Number of outstanding shares(s)	5 Million	5 Million
Earnings per share (EPS)	US$2	US$1
P/E ratio	6	4
Market Price per share (P)	US$12	US$4