Looking back at Tables 23.3 and 23.4, assume that Diversified Industries acquires High- Tech Products in a stock-for-stock transaction and no immediate synergistic benefits are expected. How long will it take the expected EPS of the combined companies to equal the expected EPS of Diversified without the merger if Diversified is expected to grow at an annual rate of 7 percent without the merger and the combined companies are expected to grow at 8 percent a year?

*The exchange ratio is 0.8 share of Diversified common stock for each 1.0 share of Stable Products and 2.0 shares of Diversified for each 1.0 share of High-Tech Products. The net income figure for Diversified Industries (after merger) assumes that no economies of scale or synergistic benefits are realized as a result of either proposedmerger.

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Table 23.3 Selected Financial Data: Diversified Industries and Two Merger Candidates Diversified Stable High-Tech Sales Earnings after taxes (EAT) Number of shares outstanding. NS Earnings per share, EPS Dividends per share, Do Common stock market price, P Price earnings (P/E) ratio Expected annual growth rate.g Industrles $1,200 miliion $120 million 40 mlilion $3.00 $1.65 $30.00 10.0 7% Products $130 mllon $12 millon 4 million $3.00 $1.50 $21.00 7.0 5% Products $100 milion $16 million 4 million $4.00 $0.80 $52.00 13.0 14% Table 23.4 Diversified Industries: Pro Forma Financial Statement Summary Assuming Separate Mergers After Merger After Merger with High-Tech Products Before Merger $1.200 million $120 mlillon 40 million $3.00 with Stable Products Sales Earnings after taxes (EAT) Common shares outstanding, NS Earnings per share, EPS $1,330 million $132 mlon 43.2 miliorn $3.06 $1,300 million $136 million 48 million $2.83