EPS and post merger price Data for Henry Company

EPS and post merger price Data for Henry Company and Myer Service are given in the following table. Henry Company is considering merging with Myer by swapping 1.25 shares of its stock for each share of Myer stock. Henry Company expects its stock to sell at the same price/earnings (P/E) multiple as before.Item Henry Company Mayer ServicesEarning available for common stock $225,000 $50,000Number of shares of common stock outstanding 90,000 15,000Market price per share $45 $50a) Calculate the ratio of exchange in market priceb) Calculate the earning per share (EPS) and price/earning (P/E) ratio for each companyc) Calculate the price/earnings (P/E) ratio used to purchase Mayer Serviced) Calculate the post merger earning per share (EPS) for Henry Companye) Calculate the expected market price per share of the merged firm. Discuss this result in light of your findings in part a.Henry Company is as follows: December31 2002 2003CommonStock $600,000 $600,000Additional paid-incapital 250,000 250,000Retainedearnings 170,000 370,000Net income for theyear 120,000 240,000Harry’s return on common stockholder’s equity, rounded to thenearest percentage point for 2003 is?


 

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