Use the Information for the Question(s)below

question 30

Essay

Use the information for the question(s)below.
Martin Manufacturing has earnings per share (EPS)of $3.00,5 million shares outstanding,and a share price of $32.Martin is considering buying Luther Industries,which has earnings per share of $2.50,2 million shares outstanding,and a share price of $20.Martin will pay for Luther by issuing new shares.There are no expected synergies from the transaction.
-Assume that Martin pays no premium to acquire Luther.Calculate Martin's price-earnings (P/E)ratio both pre- and post-merger.

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Definitions:

Long-term Liability

Financial obligations of a business that are due beyond the current fiscal year or operating cycle.

SUTA Payable

State Unemployment Tax Act payable, a liability account for taxes owed by employers to state unemployment insurance programs.

Social Security Tax

Taxes collected by the government from employees and employers to fund the Social Security program, providing retirement, disability, and survivors' benefits.

Payroll Tax Expense

Levies placed on both employers and employees, determined based on a percentage of the wages that employers distribute to their workforce.