World Enterprises is determined to report earnings per share of $3.20. It therefore acquires the Wheelrim and Axle Company. There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $3.20 earnings per share objective.

1. Complete the table below for the merged firm.
2. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
3. What is the cost of the merger to World Enterprises?
4. What is the change in the total value of the World Enterprises shares that were outstanding before the merger?

Complete the table below for the merged firm. Note: Do not round intermediate calculations. Round "Price per share" and "Price-earnings ratio" to 2 decimal places and other answers to the nearest whole number.

	World Enterprises	Wheelrim and Axle	Merged Firm
Earnings per share	$2.00	$3.00	$3.20
Price per share	$30	$15
Price-earnings ratio	15	5
Number of shares	180,000	280,000
Total earnings	$360,000	$840,000
Total market value	$5,400,000	$4,200,000

How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? Note: Do not round intermediate calculations and enter your answer rounded to 2 decimal places.

Shares exchanged for each share

What is the cost of the merger to World Enterprises? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar.

Merger cost

• What is the change in the total value of the World Enterprises shares that were outstanding before the merger? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar. Enter your answer as a positive value.

The market value of the original World shareholders' shares

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