Assume that there are no synergistic benefits as the


Apex Corporation is considering the purchase of Pinnacle Company in a stock-forstock exchange. Selected data on the two companies are shown in the following table:


Apex Pinnacle
Sales(millions) $750 $175
Earning after taxes(millions) $100 $20
Common share outstanding(millions) 50 20
Share Price $40 $15
Earning per share $2.00 $1.00
Dividend per share $1.00 $0.40
P/E ratio 20 15
Dividend payout ratio 50% 40%

Assume that there are no synergistic benefits as the result of the merger. Determine EPS for the combined company if Apex offers a

a. 20 percent premium for Pinnacle

b. 40 percent premium for Pinnacle

c. 50 percent premium for Pinnacle.

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Finance Basics: Assume that there are no synergistic benefits as the
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