Parts a) and b) are related to the following question. Muscle Manufacturing has earnings per share (EPS) of $2.00, 8 million shares outstanding, and a share price of $32. Muscle is considering buying Porter Industries, which has earnings per share of $3.00, 2 million shares outstanding, and a share price of $20. Muscle will pay for Porter by issuing new shares. There are no expected synergies from the transaction.

a) If Muscle pays no premium to acquire Porter, what will the earnings per share be after the merger? (8 marks)

b) Assume that Muscle pays no premium to acquire Porter. Calculate Muscle's price-earnings (P/E) ratio both pre- and post-merger. (3 marks)

c) Conexant corporation has announced plans to acquire MJ corporation. MJ is trading for $43 per share and Conexant is trading for $27 per share, with a premerger value for MJ of $2.9 billion. If the projected synergies from the merger are $760 million, what is the maximum exchange ratio that Conexant could offer in a stock swap and still generate a positive NPV? (3 marks) d

) Why do you think mergers cluster in time, causing merger waves? (4 marks)

e) The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $35 per share and LE is trading for $37 per share, implying a premerger value of LE of approximately $8 billion. If the projected synergies are $1 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV? (6 marks)