Morgan Foods is considering the acquisition of Old Spaghetti Warehouse Inc. in a stock-for-stock exchange. Selected financial data for the two companies is shown below. An immediate synergistic earnings benefit of $1.5 million is expected in this merger, due to cost savings.

Morgan Old Spaghetti

Sales (millions) $360 $80

Net income (millions) $30 $8

Common stock outstanding (millions) 10 2

Earnings per share $3.00 $4.00

Common stock (price per share) $36.00 $44.00

Calculate the postmerger EPS if the Old Spaghetti shareholders accept an offer of $54 per share in a stock-for-stock exchange.

$3.04

$2.92

$3.29

$3.17