The shareholders of Tilbury Company have voted in favour of a buyout offer from Dover Corporation. Information
Question:
The shareholders of Tilbury Company have voted in favour of a buyout offer from Dover Corporation. Information about each firm is given here:
Tilbury’s shareholders will receive one share of Dover stock for every three shares they hold in Tilbury.
a. What will the EPS of Dover be after the merger? What will the PE ratio be if the NPV of the acquisition is zero?
b. What must Dover feel is the value of the synergy between these two firms? Explain how your answer can be reconciled with the decision to go ahead with the takeover.
Tilbury 13.5 Dover Price-earnings ratio Shares outstanding Earnings 21 90,000 210,000 $180,000 $810,000
Step by Step Answer:
a The EPS of the combined company will be the sum of the earnings of both companies divided by the s...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0071051606
8th Canadian Edition
Authors: Stephen A. Ross, Randolph W. Westerfield
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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