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@Fertfood has a current market value of $30 million and earns $2,700,000 annually, while Tools-4U has a market value of $5 million and annual...

@Fertfood has a current market value of $30 million and earns $2,700,000 annually, while Tools-4U has a market value of $5 million and annual earnings of $1 million per year. If the companies merge an additional cash flow of $136513 would result next year. The merged firm will have 5 million shares. The merged firm's earnings in the first year will comprise the pre-merged earnings of each firm plus the additional cashflow mentioned above.


If the post-merged firm's P/E ratio is expected to be 17 what is the expected market price per share using the P/E method?

Top Answer

Fertfood 2700 Tool 1000 Additional 137 Total 3837... View the full answer

2 comments
  • I got the total is 3837, and EPS= 3837/5000=0.77, BUT why the Price is 65,221 ?
    • duouuuuuu
    • Jun 09, 2018 at 3:11am
  • 65221 = 3837 x 17 . You are calculating the value of the combined company
    • KevinHeer
    • Jun 09, 2018 at 9:15am

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