(ii) BKK Ltd is considering the acquisition by shares of GBK Ltd. The following information is also available.

BKK Ltd GBK Ltd

Present earnings $ 2,000,000 $ 500,000

Shares 500,000 200,000

Earnings per share $ 4 $2.50

Price/earnings ratio 16 12

Price of shares $ 64 $30

GBK Ltd has agreed to an offer of $35 a share to be paid in BKK Ltd shares.

Required: Calculate:

(a)Earnings per share of the combined firms.

(b) Earnings per share of GBK Ltd after the acquisition