Sunshine Pools is considering the acquisition of Cool Pools. Information about both companies is presented in the following table. Sunshine Pools has sufficient authorized but unissued shares to carry out the proposed merger.
a. Suppose the ratio of exchange is 1.6. Calculate the earnings per share (EPS) based on the original shares of each firm.
b. If Sunshine Pools changes the ratio of exchange to 2.0, calculate the earnings per share (EPS) based on the original shares of each firm.
c. If Sunshine Pools changes the ratio of exchange to 2.4, calculate the earnings per share (EPS) based on the original shares of each firm.
d. What is the change in the EPS of the acquisition firm and the target firm as calculated in parts a through c?

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Item Earnings available for common stock Number of shares of common stock outstanding Market price per share Sunshine Pools $25,000 25,000 $8.50 Cool Pools $12,000 6,000 $12.00