Your company has earnings per share of $5. It has 11million shares? outstanding, each of which...

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Your company has earnings per share of $5. It has 11millionshares? outstanding, each of which has a price of $40. You arethinking of buying? TargetCo, which has earnings of $3 per?share,11million shares? outstanding, and a price per share of $27.You will pay for TargetCo by issuing new shares. There are noexpected synergies from the transaction. Suppose you offered anexchange ratio such? that, at current? pre-announcement shareprices for both? firms, the offer represents a 20% premium to buyTargetCo.? However, the actual premium that your company will payfor TargetCo when it completes the transaction will not be 20%?,because on the announcement the target price will go up and yourprice will go down to reflect the fact that you are willing to paya premium for TargetCo without any synergies. Assume that thetakeover will occur with certainty and all market participants knowthis on the announcement of the takeover? (ignore time value of?money).
a. What is the price per share of the combined corporationimmediately after the merger is? completed?
b. What is the price of your company immediately after the?announcement?
c. What is the price of TargetCo immediately after the?announcement?
d. What is the actual premium your company will? pay?

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Your company has earnings per share of $5. It has 11millionshares? outstanding, each of which has a price of $40. You arethinking of buying? TargetCo, which has earnings of $3 per?share,11million shares? outstanding, and a price per share of $27.You will pay for TargetCo by issuing new shares. There are noexpected synergies from the transaction. Suppose you offered anexchange ratio such? that, at current? pre-announcement shareprices for both? firms, the offer represents a 20% premium to buyTargetCo.? However, the actual premium that your company will payfor TargetCo when it completes the transaction will not be 20%?,because on the announcement the target price will go up and yourprice will go down to reflect the fact that you are willing to paya premium for TargetCo without any synergies. Assume that thetakeover will occur with certainty and all market participants knowthis on the announcement of the takeover? (ignore time value of?money).a. What is the price per share of the combined corporationimmediately after the merger is? completed?b. What is the price of your company immediately after the?announcement?c. What is the price of TargetCo immediately after the?announcement?d. What is the actual premium your company will? pay?