At the end of 2017, ABC HealthTech (ABC) had 80,000 shares of common stock outstanding and had earnings available for common of $160,000. ZTech Education (ZTech), at the end of 2017, had 10,000 shares of common stock outstanding and had earned $20,000 for common shareholders. ABCs earnings are expected to grow at an annual rate of 5%, and ZTechs growth rate in earnings should be 10% per year.

a) Calculate earnings per share (EPS) for ABC HealthTech for each of the next 5 years (20182022), assuming that there is no merger.

b) Calculate the next 5 years (20182022) earnings per share (EPS) for ABC if it acquires ZTech at a ratio of exchange of 1.1.

c) Compare your findings in parts 1 and 2, and explain why the merger looks attractive when viewed over the long run