EPS and postmerger price

Data for Henry Company and Mayer Services are given in the following table,

tem	Henry Company		Mayer Services
Earnings available for common stock	$200,000		$100,000
Number of shares of common stock outstanding	90,000		20,000
Market price per share	$35		$80

Henry Company is considering merging with Mayer by swapping 1.28

shares of its stock for each share of Mayer stock. Henry Company expects its stock to sell at the same

price/earnings (P/E) multiple after the merger as before merging.

a.Calculate the ratio of exchange in market price.

b.Calculate the earnings per share (EPS) and price/earnings (P/E) ratio for each company.

c.Calculate the price/earnings (P/E) ratio used to purchase Mayer Services.

d.Calculate the post-merger earnings per share (EPS) for Henry Company.

e. Calculate the expected market price per share of the merged firm.