- An Acquirer is considering the acquisition of a Target. The acquirer wishes to assess the impact of alternative forms of payment on post-merger earnings per share (EPS). Furthermore, the acquirer believes that any synergies in the first year following closing would be fully offset by costs incurred in combining the two businesses. The Acquirers marginal tax rate is 40%. Selected data are presented as follows:

Pre-Merger Data	Acquirer	Target
Net Earnings	$281,500,000	$62,500,000
Shares Outstanding	112,000,000	18,750,000
EPS	$2.51	$3.33
Market Price Per Share	$56.25	$62.50

a. Calculate the post-merger first-year EPS following a share for share exchange in which each Target share is exchanged for 1.5 shares in the Acquirer.

b. Calculate the post-merger first-year EPS for an all-cash deal in which the Acquirer pays $84.30 in cash per share of the Target. Assume the Acquirer borrows the entire purchase price at an 8% annual interest rate with the principal repaid in ten years (and do not forget the tax deductibility of interest).

Assume the Acquirer offers a mixed purchase price: part stock (1 share of Acquirer stock per target share) and part cash ($28.05 per target share). Assume further that the cash portion of the purchase price is financed by the acquirer at an 8% annual interest rate with the principal due in ten years (again, do not forget the tax deductibility of interest). What is the post-merger first-year EPS of the combined businesses?