Mergers & Acquisitions

Suppose Great Ride Company's stock is trading for $100 a share while Shooting Star Company's stock goes for $50 a share. The EPS of Great Ride is $2 while the EPS of shooting Star is $5. Neither company has debt in its current capital structure. Both companies have one million shares of stock outstanding. A) If Great Ride can acquire Shootinfg Star for stock in an exchange based on market value, what should be the postmerger EPS? B) Suppose Great Ride pays a premium of 20% in excess of Shooting Stars current market value. How many shares of Great Ride must be given to Shooting Star's shareholders for each of their shares? C) Based on your results in B, what will Great Ride's EPS be after it acquires Shooting Star? D) If Shooting Star were to acquire Great Ride by offering a 20% premium in excess of Great Ride's current market price, how many shares of stock would Shooting Star have to offer, and what would be the effect on Shooting Star's EPS?