Your company has earnings per share of $3.96 . It has 1.2 million shares outstanding, each of which has a price of $48. You are thinking of buying TargetCo, which has earnings per share of $0.99, 1.4 million shares outstanding, and a price per share of $25. You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction. a. If you pay no premium to buy TargetCo, what will your earnings per share be after the merger? The EPS after the merger is $______ . (Round to the nearest cent.)

b. Suppose you offer an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a $20% premium to buy TargetCo. What will your earnings per share be after the merger? The EPS after the merger is $_____ . (Round to the nearest cent.)

c. What explains the change in earnings per share in part (a )? (Select the best choice below.) A. EPS always decline if the firm issues new shares to pay for a merger. B. EPS declines because you are over paying for TargetCo. C. EPS declines because TargetCo has a higher price-earnings ratio than your firm.

Are your shareholders any better or worse off? (Select the best choice below.) A. In this case, your shareholders are worse off. B. In this case, your shareholders are better off. C. In this case, your shareholders are neither worse nor better off.

d. What will your price-earnings ratio be after the merger (if you pay no premium)? How does this compare to your P/E ratio before the merger? How does this compare to TargetCo's premerger P/E ratio? The P/E ratio after the merger is_______ . (Round to two decimal places.) How does this compare to TargetCo's premerger P/E ratio? The P/E ratio before the merger was_____ . (Round to two decimal places.)

TargetCo's premerger P/E ratio was__________ . (Round to two decimal places.) (Select from the drop-down menu.) Buying TargetCo with stock and creating no synergies, the transaction simply ends-up with a company whose P/E ratio is _______(above/ below/ between) the P/E ratios of the two companies going into the transaction.