M’s Club is attempting to acquire the V’s Club. Certain financial data on these corporations are summarized in the following table. Item M’s Club V’s Club Earnings available for common stock $20,000 $8,000 Number of shares of common stock outstanding 20,000 4,000 Market price per share $12 $24 M’s Club has sufficient authorized but unissued shares to carry out the proposed merger. a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares of each firm? b. Repeat part a if the ratio of exchange is 2.0. c. Repeat part a if the ratio of exchange is 2.2. d. Discuss the principle illustrated by your answers to parts a through c
M’s Club is attempting to acquire the V’s Club. Certain financial data on these corporations are summarized in the following table. Item M’s Club V’s Club Earnings available for common stock $20,000 $8,000 Number of shares of common stock outstanding 20,000 4,000 Market price per share $12 $24 M’s Club has sufficient authorized but unissued shares to carry out the proposed merger. a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares of each firm? b. Repeat part a if the ratio of exchange is 2.0. c. Repeat part a if the ratio of exchange is 2.2. d. Discuss the principle illustrated by your answers to parts a through c
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 3P
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M’s Club is attempting to acquire the V’s Club. Certain financial data on these corporations are
summarized in the following table.
Item M’s Club V’s Club
Earnings available for common stock $20,000 $8,000
Number of shares of common stock outstanding 20,000 4,000
Market price per share $12 $24
M’s Club has sufficient authorized but unissued shares to carry out the proposed merger.
a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares
of each firm?
b. Repeat part a if the ratio of exchange is 2.0.
c. Repeat part a if the ratio of exchange is 2.2.
d. Discuss the principle illustrated by your answers to parts a through c
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