Firm B is The Bidding Firm and Firm T is the Target Firm.Their financial data...
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Finance
Firm B is The Bidding Firm and Firm T is the Target Firm.Their financial 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/E for the combined Firm BT.
(B)Calculate the Maxium number of shares firm B will be willing to offer to the sockholders of firm T at the P/E calculated in Part (A) above.What will be the minimum number of shares acceptable to the stockholders of firm T at the same P/E level?
(C) If EPS was the criterion to determine the exchange ratio,how many shares firm B would offer to stockholders of firm T?in case,Market price per share was used as a basis to determine the exchange ratio,how much would your result change?which one do you think would be a better criterion for exchange rate determination?why?
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