Problem: The shareholders of Flannery Company have voted in favor of a buyout offer from Stultz Corporation. Information about each firm is given here:
Flannery Stultz
Price-earnings ratio 5.60 16.80
Shares outstanding 59,000 177,000
Earnings $225,000 $900,000
Flannery's shareholders will receive one share of Stultz stock for every four shares they hold in Flannery.
Question 1:
(a) What will the EPS of Stultz be after the merger? Round your answer to 2 decimal places. (e.g., 32.16)
(b) What will the PE ratio be if the NPV of the acquisition is zero?(Round your answer to 2 decimal places. (e.g., 32.16)
Question 2:
What is the value of Flannery to Stulz?