Please use the following information to answer the next four multiple choice questions (Multiple Choice Questions 3, 4, 5 and 6): Red Co. would like to buy Blue Co. for a 30% control premium. Currently Red Co.s stock price is $28.42, its EPS is $2.48 and it has 103mm shares outstanding. Currently Blue Co.s stock price is $24.59 (before control premium), its EPS is $1.78 and it has 21.5mm shares outstanding. Red Co.s cost of debt is 5% and its tax rate is 40%.

3. If Red Co. uses stock to acquire Blue Co. what would Red Co.s proforma EPS be? A) $2.31 B) $2.35 C) $2.42 D) $2.48

4. If Red Co. uses stock to acquire Blue Co. what amount of pre-tax synergies are required for Red Co. to breakeven on an EPS basis? A) $0mm B) $21.7mm C) $30.3mm D) $36.2mm

5. If Red Co. uses debt to acquire Blue Co. what would Red Co.s proforma EPS be? A) $2.48 B) $2.52 C) $2.65 D) $3.78

6. What is the maximum price Red Co. can pay before the deal becomes dilutive if it acquires Blue Co. with debt? A) $35.60 B) $47.36 C) $59.33 D) $87.07