Two “Bad” Reasons for Mergers
1. Refer to the Global Resources example in section 30.8 of the text....

Question

Two “Bad” Reasons for Mergers
1. Refer to the Global Resources example in section 30.8 of the text. Suppose that instead of 40 shares, Global exchanges 100 of its shares for the 100 shares of Regional. The new Global Resources will now have 200 shares outstanding and earnings of $200. Assume the market is smart.
a. Calculate Global’s value after the merger.
b. Calculate Global’s earnings per share.
c. Calculate Global’s price per share.
d. Redo your answers to (a), (b), and (c) if the market is fooled.

David · Accepted Answer

a)The market value of combined firm is $3500.This is equal to the sum of the values of the separate firms before merger.If the market is "smart",it will realize that the combined firm is worth the sum of the values of the separate firms.
2) The earnings perr share of the merged firm are $ 1.43.

Two “Bad” Reasons for Mergers 1. Refer to the Global Resources example in section 30.8 of the text. Suppose that instead of 40 shares, Global exchanges 100 of its shares for the 100 shares of...

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