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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.
Replacement Parts
Components that are designed to replace original parts of a machine or system that have worn out or failed.
Commercial Substance
An occurrence in a transaction where the future cash flows or the economic circumstances of the involved parties change as a result.
Trade-In Allowance
The discount or credit granted for the return of an old item when purchasing a new one.
Depreciation
The allocation of the cost of a tangible asset over its useful life, representing the decrease in value due to wear and tear, age, or obsolescence.
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