The Muck and Slurry merger has fallen through (see Section 33.2). But World Enterprises is determined to
Question:
The Muck and Slurry merger has fallen through (see Section 33.2). But World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts:
Once again there are no gains from merging. In exchange for Wheelrim and Axle shares,
World Enterprises issues just enough of its own shares to ensure its $2.67 earnings per share objective.
a. Complete the above table for the merged firm.
b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
c. What is the cost of the merger to World Enterprises?
d. What is the change in the total market value of the World Enterprises shares that were outstanding before themerger?
Step by Step Answer:
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers