Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. Rearden Metal 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. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction.

If Rearden offers an exchange ratio such that, at current pre- announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel, then actual premium Rearden will pay will be closest to: