PROBLEM 4 20 Exxo Corp. is considering a horizontal merger with Mobi Inc. financed with an exchange of stock. Number of shares outstanding, earnings per share and stock prices of two companies prior to the merger are given in the table below. Assume no synergies, ie, no economic gains from the merger Mobi 2 10 ExxoMobi EXXO 4 E50 Earnings per share (EPS) Price per share Price-earnings ratio (P/E) Number of shares Total earnings Total market value Current earnings percentage 400,000 400,000 (per 1 invested in stock) a) Calculate the missing values in the table, assuming that the stock offer is agreeable for both sides of the deal. b) Will the EPS of Exxo increase or decrease after the merger? Should this influence the decision as to whether Exxo should go ahead with the merger? After further investigation, the chief financial officer of Exxo realizes that the economies of scale after the merger will reduce costs and the present value ofexpected economic gains is 2,000,000. Exxo updates its offer as one share in ExxoMob for every four shares of Mobi. c) What does the cost of the merger appear to be? What is the true cost of the merger? d) PROBLEM 4 20 Exxo Corp. is considering a horizontal merger with Mobi Inc. financed with an exchange of stock. Number of shares outstanding, earnings per share and stock prices of two companies prior to the merger are given in the table below. Assume no synergies, ie, no economic gains from the merger Mobi 2 10 ExxoMobi EXXO 4 E50 Earnings per share (EPS) Price per share Price-earnings ratio (P/E) Number of shares Total earnings Total market value Current earnings percentage 400,000 400,000 (per 1 invested in stock) a) Calculate the missing values in the table, assuming that the stock offer is agreeable for both sides of the deal. b) Will the EPS of Exxo increase or decrease after the merger? Should this influence the decision as to whether Exxo should go ahead with the merger? After further investigation, the chief financial officer of Exxo realizes that the economies of scale after the merger will reduce costs and the present value ofexpected economic gains is 2,000,000. Exxo updates its offer as one share in ExxoMob for every four shares of Mobi. c) What does the cost of the merger appear to be? What is the true cost of the merger? d)