Question: Differential P/E games: This is a problem that illustrates how the differential P/E games have been played by companies like Tyco. We first present the

Differential P/E games: This is a problem that illustrates how the differential P/E games have been played by companies like Tyco. We first present the basic input data in Table Q18.1.
(a) Complete the table.
(b) Discuss the general implications suggested by this model.
Table Q18.1 Model of Differential P/E Ratios

1. Net income 2. Number of shares 3. EPS (old) 4 P/E ratio 5. Price/share 6 Total market value fold Acquirer (A) $100 100 SI 50x S50 5,000 83.3% 0.4A1 TargetT) S100 100 SI 10x S10 $1.000 16.7% $20 100% Combined 5200 140 1.43 50x S71.43 (new) 6,000 8. Terms paid (A for T) 9. Premium to l 10, EPS (new 11 EPS ( change) 12 Total market values (new) 13 Market values(5 change, 14. Proportion s (new

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a Solution to Table S185 Model of Differential PE Ratios Acquirer A Target T Combined 1 Net Income 100 100 200 2 Number of Shares 100 100 140 3 EPS ol... View full answer

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