Question
A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows: Minnie Corporation Mickey Corporation Total
A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows:
| Minnie Corporation | Mickey Corporation | |||
| Total earnings | $2,450,000 | $3,325,000 | ||
| Number of shares of stock outstanding | 350,000 | 950,000 | ||
| EPS | $7.00 | $3.50 | ||
| P/E ratio | 10X | 20X | ||
| Market price per share | $70 | $70 | ||
a. On a share-for-share exchange basis, what will the postmerger EPS be? (Round the final answer to 2 decimal places.)
Postmerger earnings per share $
b. If Mickey Corporation pays a 25 percent premium over the market value of Minnie Corporation, how many shares will be issued? (Do not round intermediate calculations.)
Shares issued shares
c. With the 25 percent premium, what will the postmerger EPS be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Postmerger earnings per share $
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