Question 6 Your company has earnings per share of 4. It has 1 million shares outstanding, each of which has a price of 40. You are thinking of buying DeltaCo, which has earnings per share of 2, 1 million shares outstanding, and a price per share 25. You will pay for DeltaCo by issuing new shares. The synergy as a result of this acquisition will increase your original company's EPS and share price both by 25%. (a) If you pay no premium to buy DeltaCo, what will your earnings per share be after the acquisition? (4 marks) Starting from this point, suppose you pay a 20% premium to buy DeltaCo. (b) What will your earnings per share be after the acquisition? (6 marks) (c) Are you better off with this acquisition? What is the maximum percentage premium you are willing to pay before DeltaCo becomes too expensive to acquire? (7 marks) (d) Instead of using pure equity to pay for the deal, now assume you pay the deal with 50% cash coming from your old company and 50% newly issued shares. What is the number of shares issued? (8 marks)