Firm A wants to acquire Firm B. Firm A estimates that a constant growth rate for Firm

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Firm A wants to acquire Firm B. Firm A estimates that a constant growth rate for Firm B's earnings and dividends is 8%. Under new management, the growth rate will be increased to 10% per year without the need for additional capital. Financial information for both firms is as below. What is the gain from the acquisition?

A B

Forecast earnings per share $5.00 $1.50

Forecast dividends per share $3.00 $0.80

Number of shares 1,000,000 700,000

Stock price $90 $20

Related Book For answer-question

Financial Reporting Financial Statement Analysis and Valuation a strategic perspective

ISBN: 978-1337614689

9th edition

Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

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Posted Date: May 03, 2023 12:55 AM

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Firm A wants to acquire Firm B. Firm A estimates that a constant growth rate for Firm

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Financial Reporting Financial Statement Analysis and Valuation a strategic perspective

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