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- DILUTION ANALYSIS
- WHEN TWO PUBLICLY TRADED COMPANIES DECIDE TO MERGE VIA USE OF
- AN EXCHANGE OF STOCK, THE ANALYSIS IS DOMINATED BY THE EXCHANGE
- RATIO(I.E. # OF SHARES THE SURVIVING COMPANY OFFERS FOR EACH
- SHARE OF THE ACQUIRED COMPANY), THE PRICE-EARNINGS RATIOS OF
- THE SURVIVING FIRM, AND GENERAL CONDITIONS IN THE STOCK MARKET.
- IN GENERAL WE DO NOT WANT EARNINGS PER SHARE FOR THE ACQUIRING
- TO DECREASE. IF A DECREASE OCCURS THEN DILUTION OCCURS.
- IF THE P-E RATIO FOR THE ACQUIRING FIRM REMAINS AS BEFORE THE
- MERGER THEN DILUTION MEANS A LOWER PER SHARE STOCK PRICE.
- IN THIS PROGRAM WE INPUT FOR EACH OF THE TWO COMPANIES THE
- FOLLOWING: EARNINGS AFTER TAXES, SHARES OUTSTANDING,ERS, SHARE
- PRICE AT TIME OF EXCHANGE. WE ALSO INPUT THE EXCHANGE RATIO.
- OUTPUT CONSISTS OF THE NUMBER OF NEW SHARES ISSUED, EARNINGS
- AFTER TAXES AND EARNINGS PER SHARE FOR THE SURVIVING FIRM.
- PRESS ENTER TO BEGIN?
- ANSWER THE FOLLOWING FOR THE ACQUIRING FIRM
-
- EARNINGS AFTER TAXES ? 123456789
- SHARES OUTSTANDING ? 987654
- PRICE AT TIME OF EXCHANGE ? 345
-
- ANSWER THE FOLLOWING FOR THE ACQUIRED FIRM
-
- EARNINGS AFTER TAXES ? 678234
- SHARES OUTSTANDING ? 842741
- PRICE AT TIME OF EXCHANGE ? 65
-
- INPUT EXCHANGE RATIO ? 7.75
- ACQUIRING(BEFORE) ACQUIRED ACQUIRING(AFTER)
-
- EAT 123456789.00 678234.00 124135023.00
- SH. OUTST. 987654.00 842741.00 7518896.75
- ERS 125.00 0.80 16.51
- P-E RATIO 2.76 80.77
-
- EXCHANGE RATIO IS 7.75 ACQUIRING FOR EACH 1 ACQUIRED.
-
- ASSUMING NEW P-E RATIO WILL BE BETWEEN 2.76 AND 80.7659
- NEW PER SHARE PRICE WILL BE BETWEEN 45.5669 AND
- 1333.42
-
- PRESS ENTER FOR MORE COMPUTATIONS? -1
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