QUESTION 5: (20 marks) ODA a) What are some reasons why a horizontal merger might create value for shareholders? (2 marks) b) Leopard Co earning per share (EPS_ is $3.5 for its 1.2 million shares outstanding that is trading at the price of $50 per share. Leopard is thinking of buying Speedmart, that has EPS of $3,800000 shares outstanding, and share price of $20. Leopard is planning to purchase speedmart by issuing new shares. 1. If you pay no premium to buy Speedmart, what will be your earnings per share after the merger? (5 marks) ll. Suppose you offer an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Speedmart. What will be your earnings per share after the merger? (3 marks) 1. What explains the change in earnings per share in ()? Are your shareholders any better or worse off? (5 marks) w. What will be your price earnings ratio after the merger (if you pay no premium? How does this compare to your P/E ratio before the merger? How does this compare to Speedmart's premerger P/E ratio? 15 marks) QUESTION 5: (20 marks) ODA a) What are some reasons why a horizontal merger might create value for shareholders? (2 marks) b) Leopard Co earning per share (EPS_ is $3.5 for its 1.2 million shares outstanding that is trading at the price of $50 per share. Leopard is thinking of buying Speedmart, that has EPS of $3,800000 shares outstanding, and share price of $20. Leopard is planning to purchase speedmart by issuing new shares. 1. If you pay no premium to buy Speedmart, what will be your earnings per share after the merger? (5 marks) ll. Suppose you offer an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Speedmart. What will be your earnings per share after the merger? (3 marks) 1. What explains the change in earnings per share in ()? Are your shareholders any better or worse off? (5 marks) w. What will be your price earnings ratio after the merger (if you pay no premium? How does this compare to your P/E ratio before the merger? How does this compare to Speedmart's premerger P/E ratio? 15 marks)