Question
In: Finance
The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are...
The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are as follows:
| A-Rod Corp. | Jeter Corp. | |||||
| Total earnings | $715,000 | $4,500,000 | ||||
| Number of shares of stock outstanding | 325,000 | 2,250,000 | ||||
| Earnings per share | $2.20 | $2.00 | ||||
| Price-earnings ratio (P/E) | 20 | 22 | ||||
| Market price per share | $44 | $44 | ||||
a. The Jeter Corp. is going to give A-Rod Corp.
a 50 percent premium over A-Rod’s current market value. What price
will it pay? (Do not round intermediate calculations and
round your answer to the nearest whole number.)
b. At the price computed in part a,
what is the total market value of A-Rod Corp.? (Use the number of
A-Rod Corp. shares times price.) (Do not round intermediate
calculations and round your answer to the nearest whole
number.)
c. At the price computed in part a,
what is the P/E ratio Jeter Corp. is assigning A-Rod Corp?
(Do not round intermediate calculations and round your
answer to 2 decimal places.)
d. How many shares must Jeter Corp. issue to
buy the A-Rod Corp. at the total value computed in part b?
(Do not round intermediate calculations and round your
answer to the nearest whole number.)
e. Given the answer to part d, how
many shares will Jeter Corp. have after the merger? (Do not
round intermediate calculations and round your answer to the
nearest whole number.)
f. What are the new postmerger earnings per
share? (Do not round intermediate calculations and round
your answer to 2 decimal places.)
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are...
The Jeter Corporation is considering acquiring the A-Rod
Corporation. The data for the two companies are as follows:
A-Rod Corp.
Jeter Corp.
Total earnings
$
572,000
$
2,400,000
Number of shares of stock outstanding
220,000
1,200,000
Earnings per share
$
2.60
$
2.00
Price-earnings ratio (P/E)
20
26
Market price per share
$
52
$
52
a. The Jeter Corp. is going to give A-Rod Corp.
a 50 percent premium over A-Rod’s current market value. What price
will it pay?...
T The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies...
T
The Jeter Corporation is considering acquiring the A-Rod
Corporation. The data for the two companies are as follows:
A-Rod Corp.
Jeter Corp.
Total earnings
$
918,000
$
3,100,000
Number of shares of stock outstanding
255,000
1,550,000
Earnings per share
$
3.60
$
2.00
Price-earnings ratio (P/E)
20
36
Market price per share
$
72
$
72
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_______________________________________________________________________ JETER CORPORATION Income Statement For the Year Ended December 31, 2019 Sales.......................................................................................... $ 3,300,000 Co
_______________________________________________________________________
JETER CORPORATION
Income Statement
For the Year Ended December 31, 2019
Sales..........................................................................................
$ 3,300,000
Cost of goods
sold....................................................................
1,950,000
Gross
profits.......................................................................
1,350,000
Selling and administrative
expense..........................................
650,000
Depreciation
expense................................................................
230,000
Operating
income................................................................
470,000
Interest
expense........................................................................
80,000
Earnings before
taxes.........................................................
390,000
Taxes.........................................................................................
140,000
Earnings after
taxes............................................................
250,000
Preferred stock
dividends............................................................
10,000
Net Income Available to Common Shareholders.....................
$ 240,000
Shares
outstanding..................................................................
150,000
Current Stock
Price...................................................................
$ 16.00
_______________________________________________________________________
_______________________________________________________________________...
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