Question
Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden is thinking
Rearden Metal Company has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. There are no expected synergies from the transaction. Rearden will pay for Associated Steel by issuing new shares, and the exchange ratio will be such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. How many new shares will Rearden have to issue?
Group of answer choices 1.2 million 4.9 million 3.6 million 8.3 million
Continuing with Reardens acquisition of Associated Steel from the prior question what will the price per share of the combined corporation be after the acquisition?
Group of answer choices $17.19 $9.83 $19.12 $28.32
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