World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim...

World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.67 earnings per share objective.

	World Enterprises	Wheelrim and Axle	Merged Firm
Earnings per share	$2.00	$2.50	$2.67
Price per share	$40	$25	$34.43
Price-earnings ratio	20	10	12.86
Number of shares	100,000	200,000	262,172
Total earnings	$200,000	$500,000	$700,000
Total market value	$4,000,000	$5,000,000	$9,000,000

a. Complete the table below for the merged firm.
b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
c. What is the cost of the merger to World Enterprises?
d. What is the change in the total value of the World Enterprises shares that were outstanding before the merger?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

World Enterprises is determined to report earnings per share of $2.67, and therefore acquires the Wheelrim...

World Enterprises is determined to report earnings per share of $2.67, and therefore acquires the Wheelrim and Axle Company. You are given the following facts: World Enterprises Wheelrim and Axle Merged Firm Earnings per share $2.00 $2.50 $2.67 Price per share $40 $25 ? Price-earnings ratio 20 10 ? Number of shares 100,000 200,000 ? Total earnings $200,000 $500,000 ? Total market value $4,000,000 $5,000,000 ? There are no gains from merging. In exchange for Wheelrim and Axle shares, World...

World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim...

World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts: World Enterprises Wheelrim and Axle Merged Firm Earnings per share $ 2.00 $ 2.50 $2.67 Price per share $ 40 $ 25 ? Price–earnings ratio 20 10 ? Number of shares 100,000 200,000 ? Total earnings $ 200,000 $ 500,000 ? Total market value $ 4,000,000 $ 5,000,000 ? There are no gains from merging....

World Enterprises is determined to report earnings per share of $2.80. It therefore acquires the Wheelrim...

World Enterprises is determined to report earnings per share of $2.80. It therefore acquires the Wheelrim and Axle Company. There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.80 earnings per share objective. a. Complete the table below for the merged firm. (Do not round intermediate calculations. Round "Price per share" and "Price-earnings ratio" to 2 decimal places and other answers to the nearest...

World Enterprises is determined to report earnings per share of $3.20. It therefore acquires the Wheelrim...

World Enterprises is determined to report earnings per share of $3.20. It therefore acquires the Wheelrim and Axle Company. There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $3.20 earnings per share objective. a. Complete the table below for the merged firm. (Do not round intermediate calculations. Round "Price per share" and "Price-earnings ratio" to 2 decimal places and other answers to the nearest...

Orion plc is determined to report earnings per share of 267p. It therefore acquires Mintaka plc....

Orion plc is determined to report earnings per share of 267p. It therefore acquires Mintaka plc. There are no gains associated with the acquisition. In exchange for Mintaka’s shares, Orion issues just enough of its own shares to ensure its 267p earnings per share objective. Please find the following information: Orion Mintaka Earnings per Share £2.00 £2.50 Price per Share £40 £25 Price-Earnings Ratio 20 10 Number of Shares 100,000 200,000 Earnings £200,000 £500,000 Market Value £4,000,000 £5,000,000...

Orion plc is determined to report earnings per share of 267p. It therefore acquires Mintaka plc....

Orion plc is determined to report earnings per share of 267p. It therefore acquires Mintaka plc. There are no gains associated with the acquisition. In exchange for Mintaka’s shares, Orion issues just enough of its own shares to ensure its 267p earnings per share objective. Please find the following information: OrionMintaka Earnings per Share£2.00 £2.50 Price per Share £40 £25 Price-Earnings Ratio20 10 Number of Shares100,000200,000 Earnings £200,000£500,000 Market Value £4,000,000£5,000,000 Required: a)How many shares in the combined firm have...

1. You expect that Bean Enterprises will have earnings per share of $2 for the coming...

1. You expect that Bean Enterprises will have earnings per share of $2 for the coming year. Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects with an expected return of 20% per year. If Bean's equity cost of capital is 10%,...

1. You expect that Bean Enterprises will have earnings per share of $2 for the coming...

The SEC requires that firms report both basic and diluted earnings per share in their 10-K...

The SEC requires that firms report both basic and diluted earnings per share in their 10-K reports. Why do firms’ basic EPS and diluted EPS differ? Which EPS number is more informative to you as an investor?

2. In Apple’s just-released financial report, it had an earnings per share of E0 = $4....

2. In Apple’s just-released financial report, it had an earnings per share of E0 = $4. It has also just paid dividend per share of D0 = $1. The risk-free rate is 0%, Apple stock's beta is 1, and the expected market return is 10%. Currently, Apple has a stock price of $100. You assume Apple's dividend grows at a constant rate. a. What is Apple's ROE implied by the dividend discount model? (That is, you need to use the...

Subjects