Big plc is to take over Little plc and plans to offer its shares in payment for

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Big plc is to take over Little plc and plans to offer its shares in payment for Little’s shares.

Number of shares Earnings Earnings per share Price/earnings ratio Share price Market value Big plc 200m 20m

If we assume that Big has to pay £25m (market value) to take over Little, Big must issue 10 million new shares. Details of the enlarged company are as follows:

Number of shares = Earnings EPS (25/210) = = (200 + 10) 210m (20+5) = 25m 11.9p =

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Corporate Finance Principles And Practice

ISBN: 9781292450940

9th Edition

Authors: Denzil Watson, Antony Head

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Question Posted: Nov 02, 2023 07:19 AM

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Big plc is to take over Little plc and plans to offer its shares in payment for

Question:

Number of shares Earnings Earnings per share Price/earnings ratio Share price Market value Big plc 200m £20m 10p 25 £2.50 £500m Little plc 25m £5m 20p 5 £1 £25m

Step by Step Answer:

We can see that Big has manufactured an increase in its EPS Big plc hopes that the mark...View the full answer

Corporate Finance Principles And Practice

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