Please solve the question for me.Thanks



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Assume you were advising a client - trading at 15x P/E with a EPS of $2. The client company has 2 million outstanding shares. If a potential acquirer wants to pay a 20% premium to the stock price, what will be the acquisition value of your client?

$60 million

$72 million

$20 million

$30 million

2 Answer(s)


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P/E = 15 and E = 2 so P (price per share) should be easy to calculate by substituting the values. Add 20% to that share price and multiply by 2 million shares and you will get the acquisition value.

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Hi Ashish,

P/E is nothing but Market Value of Share/Earning per Share

so in this Suppose MV is X then we have

15= X/2

therefore X = $30 which is market value of the share.

Networth of the company = 2million*$30 = 60Million

Permium = 20% so 60+60*.02= 72 million is Acquisition Price