Fdave plans to acquire Maf in the same business sector, and will pay cash for shares of the company. The cash would be raised by Fdave through a 2 for 5 rights issue at 15% discount to its current share price.
The purchase price of the 1.6m issued shares of Maf would be equal to the rights issue funds raised, less issue costs of $425,000.
EPS of Maf at the time of acquisition would be 52.8c per share.
Fdave maintains a payout ratio of 60% per year and EPS is currently 72c per share. Dividend growth of 6% per year is expected for the foreseeable future and the company’s cost of equity is 15% per year. Number of shares in issue= 4m $1 each.
a) Using P/E ratio methd, calculate the share price and market capitalisation of Maf before the acquisition,
b) Calculate the share price after the acquisition
Please help. Thank You!
The purchase price of the 1.6m issued shares of Maf would be equal to the rights issue funds raised, less issue costs of $425,000.
EPS of Maf at the time of acquisition would be 52.8c per share.
Fdave maintains a payout ratio of 60% per year and EPS is currently 72c per share. Dividend growth of 6% per year is expected for the foreseeable future and the company’s cost of equity is 15% per year. Number of shares in issue= 4m $1 each.
a) Using P/E ratio methd, calculate the share price and market capitalisation of Maf before the acquisition,
b) Calculate the share price after the acquisition
Please help. Thank You!