Big Co. would like to buy Small Co. for a 25% premium. Currently Big Co.’s stock price is $33.24, its EPS is $2.98 and it has 75mm shares…

Big Co. would like to buy Small Co. for a 25% premium. Currently Big Co.’s stock price is $33.24, its EPS is $2.98 and it has 75mm shares outstanding. Currently Small Co.’s stock price is $22.50 (before premium), its EPS is $2.35 and it has 19mm shares outstanding. Big Co.’s cost of debt is 5.5% and its tax rate is 35%.

4. If Big Co. uses stock to acquire Small Co. what would Big Co.’s proforma EPS be?

A) $3.58.

B) $3.27.

C) $2.94.

D) $2.83.

5. If Big Co. uses debt to acquire Small Co. what would Big Co.’s proforma EPS be?

A) $3.58.

B) $3.32.

C) $3.23.

D) $3.18.

6. What is the maximum price Big Co. can pay before the deal becomes dilutive if it acquires Small Co. with debt?

A) $65.73

B) $65.35.

C) $64.64.

D) $64.62

Order the answer to view it

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

Posted in Uncategorized