Acquiring Company is considering the acquisition of Target Company in a stock for stock transaction in which Target Company would receive $50.00 for each share of its common stock. The Acquiring Company does not expect any change in earnings in both firms after the merger, but it expects that this merger will increase its P/E ratio by 30%.
Acquiring Co.Target Co.
Earnings available for common stock $350,000 $50,000
Number of shares of common stock outstanding 60,000 20,000
Market price per share $100.00 $40.00
Using the information provided above on these two firms and calculate the Acquiring Company post-merger share price. Showing all your work.