Question

A. To calculate the price/earnings ratio, you need the stock's market price (P) and its earnings per share (EPS). The formula for the price/earnings ratio is:

Price/Earnings Ratio = Market Price (P) / Earnings per Share (EPS)
b. To calculate the premium percentage received by Grey stockholders, you'll need the premium amount (the difference between the acquisition price and the stock's market price before the acquisition) and the stock's market price before the acquisition. The premium percentage can be calculated using the following formula:
Premium Percentage = (Premium Amount / Market Price Before Acquisition) x 100
Make sure to use the relevant numbers and round your answers to one decimal place as specified.

Answer 1

The price per share can be calculated using the present discounted value (PDV) method by dividing the PDV of total profits by the number of shares.

Step-by-step explanation:

The price per share can be calculated using the present discounted value (PDV) method. First, calculate the PDV of total profits by adding up all the present values for different time periods, given the 15% interest rate. Then, divide the PDV of total profits by the number of shares, which in this case is 200. This will give you the price per share.

For example, let's say the total profits (PDV) are $51.3 million and the number of shares is 200. The price per share would be $51.3 million / 200 = $256,500 per share.

It's important to note that the PDV method is based on expected future profits, which are not always precise. Additionally, the interest rate used can vary depending on various factors.