Question
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
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 Rearden's earnings per share after the merger will be closest to:
A. $4.12
B. $1.12
C. $2.12
D. $3.12
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