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Marla's Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized

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Marla's Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table.



Marla's Cafe has sufficient authorized but unissued shares to carry out the proposed merger.
a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares of each firm?
b. Repeat part a if the ratio of exchange is 2.0.
c. Repeat part a if the ratio of exchange is 2.2.
d. Discuss the principle illustrated by your answers to parts a through c.

Transcribed Image Text:

Marla's Cafe $20,000 20,000 Item Earnings available for common stock Number of shares of common stock outstanding Market price per share Victory Club $8,000 4,000 $24 $12

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a Number of additional shares needed 18 4000 7200 EPS of merged firm 28000 20000 7200 1029 EPS of Ma...View the full answer


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