The Blue Oil Corporation and the Grey Plastics Company have agreed to a merger. The Grey Plastics stockholders will receive 0.75 shares of Blue for each share of Grey held. Assume that no synergistic benefits are expected.
a. Complete the following table:
b. Calculate the premium percentage received by the Grey stockholders. Assume both that immediate synergistic earnings of $3 million per year will occur as a result of the merger and that the P/E ratio of the combined companies is 10.5.
c. Rework part a.
d. Rework partb.