Rearden Metal has earnings per share of $3. It has 20 million shares outstanding and is trading at $10

per share. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.00, 10

million shares outstanding, and a price per share of $10. 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 30% premium to buy Associated Steel, then what will be the new value of the target?

A. 530 million

B. 130 million

C. 230 million

D. 150 million