Differential P/E games: This is a problem that illustrates how the differential P/E games have been played
Question:
(a) Complete the table.
(b) Discuss the general implications suggested by this model.
Table Q18.1 Model of Differential P/E Ratios
Transcribed Image Text:
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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Related Book For
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
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