Ivory has $25 million in after-tax earnings and 6 million shares outstanding each priced at $34. Ivory is considering acquiring Red Ink. Red Ink has $4 million in after-tax earnings and 4 million shares outstanding each priced at $14. Ivory believes that the acquisition will yield $2 million in immediate synergistic earnings. Ivory is planning to bid with an offer price of $17.

Determine the exchange ratio.

2

0.5

1

1.5

Determine EPS for the combined company.

$3.87

$3.47

$3.27

$3.07

Determine the offer price at which Ivory does not experience EPS dilution after the acquisition.

$12.34

$11.34

$8.16

$7.34

Suppose you have 100 call options on Apples stock with strike price of $125 and exercise date of January 2021. You expect that there is a 60% chance that the stock price will be $130 and there is a %40 chance that the stock price will be $120. Ignoring time value of money, what is the value of the options you have right now?

$500

$400

$300

$0