Markham Equities Limited (MEL) is evaluating four possible targets, which have the following financial data: B...

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Markham Equities Limited (MEL) is evaluating four possible targets, which have the following financial data: B PV of incremental cash flows (synergy) stock outstanding Shares of common Price per share Expected Earnings A $6,000,000 300,000 $70 $2,000,000 $4,500,000 400,000 $40 $1,500,000 C $4,000,000 250,000 $80 $2,250,000 D $8,000,000 600,000 $55 $3,000,000 MEL presently has 1,000,000 shares outstanding, its stock price is $50, and its expected earnings are $5,000,000 without any merger. Assume that the target firms have no debt and each of the target firm can be acquired at a merger premium of 25% a. Calculate the NPV of the four proposed mergers. Are any of the mergers infeasible? b. Assuming acquisition through stock. Determine the post-merger EPS for the feasible merger candidates. c. If only one merger can be undertaken, which one is it? Why? Markham Equities Limited (MEL) is evaluating four possible targets, which have the following financial data: B PV of incremental cash flows (synergy) stock outstanding Shares of common Price per share Expected Earnings A $6,000,000 300,000 $70 $2,000,000 $4,500,000 400,000 $40 $1,500,000 C $4,000,000 250,000 $80 $2,250,000 D $8,000,000 600,000 $55 $3,000,000 MEL presently has 1,000,000 shares outstanding, its stock price is $50, and its expected earnings are $5,000,000 without any merger. Assume that the target firms have no debt and each of the target firm can be acquired at a merger premium of 25% a. Calculate the NPV of the four proposed mergers. Are any of the mergers infeasible? b. Assuming acquisition through stock. Determine the post-merger EPS for the feasible merger candidates. c. If only one merger can be undertaken, which one is it? Why?

Answer rating: 100% (QA)

a NPV of the four proposed mergers Target B PV of incremental cash flows 4500000 Shares of common stock outstanding 400000 Price per share 40 Merger premium 25 NPV PV of incremental cash flows Shares ... View the full answer