Beta Corporation and Gamma Ltd.are merging.

The basis for the merger will be a share-for-share exchange based on market prices,and the share value of the combined firm is expected to remain unchanged.What would the earnings per share and price-earnings ratio be after the merger?
A) 1.73 and 17.34
B) 1.35 and 22.22
C) 1.6 and 18.75
D) 2 and 15

Question

Beta Corporation and Gamma Ltd.are merging.
  
The basis for the merger will be a share-for-share exchange based on market prices,and the share value of the combined firm is expected to remain unchanged.What would the earnings per share and price-earnings ratio be after the merger? 
A) 1.73 and 17.34 
B) 1.35 and 22.22 
C) 1.6 and 18.75 
D) 2 and 15

Quizplus · Accepted Answer

EPS = ($800,000 + $240,000)/(400,000 + 200,000)= $1.73
Price-earnings ratio = 30/1.73 = 17.34

Beta Corporation and Gamma Ltd.are Merging