Banana is considering the purchase of Pineapple in a stock-for-stock exchange. Bananas earnings after taxes is $100 million and shares outstanding is 50 million each priced at $40. Pineapples earnings after taxes is $20 million and shares outstanding is 20 million each priced at $15. Banana and Pineapple expect that there will be $4 million synergistic benefits as the result of the merger. Banana has offered an offer price that implies a 20% premium for Pineapple.

What is the offer price?

$13

$15

$18

$20

Determine the exchange ratio.

0.55

0.50

0.45

0.40

Determine EPS for the combined company.

$1.4

$1.7

$1.8

$2.1