Question

In: Finance

  Data for Henry Company and Mayer Services are given in the following​ table, Item Henry Company...

  Data for Henry Company and Mayer Services are given in the following​ table,

Item

Henry Company

Mayer Services

Earnings available for common stock

$230,000

​$100,000

Number of shares of common stock outstanding

110,000

10,000

Market price per share

$43

​$200

Henry Company is considering merging with Mayer by swapping 1.19 shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same price/earnings

​(P/E) multiple after the merger as before merging.

a.  Calculate the ratio of exchange in market price.

b.  Calculate the earnings per share​ (EPS) and​ price/earnings (P/E) ratio for each company.

c.  Calculate the​ price/earnings (P/E) ratio used to purchase Mayer Services.

d.  Calculate the ​post-merger earnings per share​ (EPS) for Henry Company.

e. Calculate the expected market price per share of the merged firm.                           

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago
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