Consider the following pre-merger information about Firm A and Firm B:Firm AFirm BTotal earnings$2,100$750Shares outstan...
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Consider the following pre-merger information about Firm A and Firm B:
Firm A | Firm B | |
Total earnings | $2,100 | $750 |
Shares outstanding | 900 | 300 |
Price per share | $60 | $12 |
Assume that Firm A acquires Firm B via an exchange of stock at a price of $13 for each share of B's stock. Both A and B have no debt outstanding.
What will the earnings per share, EPS, of Firm A be after the merger? AND What will be the share price of A be after the merger if there are no synergy gains? Please show your work.