The shareholders of Flannery Company have voted in favor of a buyout offer from Stultz Corporation....

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Finance

The shareholders of Flannery Company have voted in favor of abuyout offer from Stultz Corporation. Information about each firmis given here:
Flannery Stultz
Price–earnings ratio 12.8 35
Shares outstanding 96,000 350,000
Earnings $ 210,000 $ 840,000

Flannery’s shareholders will receive one share of Stultz stock forevery three shares they hold in Flannery.

a-1. What will the EPS of Stultz be after themerger? (Do not round intermediate calculations and roundyour answer to 3 decimal places, e.g., 32.161.)

EPS           $

a-2. What will the PE ratio be if the NPV of theacquisition is zero? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g.,32.16.)

PE

b. What must Stultz feel is the value of thesynergy between these two firms? (Do not leave the cellblank. Enter "0" if there is no value. Do not round intermediatecalculations.)

Synergy value          $

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Solution a1 The formula to calculate the EPS of Stultz after merger is as follows EPS after merger earnings of Flannery earnings of Stultz Synergy amount total number of shares of Stultz total number of shares of Flannery exchange ratio 210000 840000 0 350000 96000 13 1050000 See Answer

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The shareholders of Flannery Company have voted in favor of abuyout offer from Stultz Corporation. Information about each firmis given here:FlanneryStultzPrice–earnings ratio12.835Shares outstanding96,000350,000Earnings$210,000$840,000Flannery’s shareholders will receive one share of Stultz stock forevery three shares they hold in Flannery.a-1. What will the EPS of Stultz be after themerger? (Do not round intermediate calculations and roundyour answer to 3 decimal places, e.g., 32.161.)EPS $a-2. What will the PE ratio be if the NPV of theacquisition is zero? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g.,32.16.)PE b. What must Stultz feel is the value of thesynergy between these two firms? (Do not leave the cellblank. Enter "0" if there is no value. Do not round intermediatecalculations.)Synergy value $

	Flannery		Stultz
Price–earnings ratio		12.8		35
Shares outstanding		96,000		350,000
Earnings	$	210,000	$	840,000