The Jeter Corporation is consi

The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are as follows:

A-Rod Corporation Jeter Corporation
Total earnings $504,000 $2,200,000
Number of shares of stock outstanding 210,000 1,100,000
EPS $2.40 $2.00
P/E ratio 15 18
Market price per share $36 $36

a.The Jeter Corp. is going to give A-Rod Corp. a 50 percent premium over A-Rod Corp.’s current market value. What price will it pay?

Price $

b.At the price computed in part a, what is the total market value of A-Rod Corp.?

Market value $

c.At the price computed in part a, what is the P/E ratio Jeter Corp. is assigning to A-Rod Corp.? (Round the final answer to 1 decimal place.)

P/E ratio

d.How many shares must Jeter Corp. issue to buy the A-Rod Corp. at the total value computed in part b?

New shares

e. Given the answer to part d, how many shares will Jeter Corp. have after the merger?

Total shares

f.Add together the total earnings of both corporations and divide by the total number of shares computed in part e. What are the new post merger EPS? (Round the final answer to 2 decimal places.)

New postmerger EPS $

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