-Assume Company a Pays a 20% Premium for Company B

question 34

Multiple Choice

$\begin{array}{lcc}&\text { Company A }&\text {Company B }\\\text { Total earnings } & \$ 2,000,000 & \$ 1,000,000 \\\text { Number of shares outstanding } & 400,000 & 100,000 \\\text { Earnings per share } & \$ 5.00 & \$ 10.00 \\\text { Price/earnings } & 6 \mathrm{X} & 3 \mathrm{X} \\\text { Market price share } & \$ 30.00 & \$ 30.00\end{array}$
-Assume Company A pays a 20% premium for Company B in a pooling of interests' transaction. Calculate the post merger

• A) $10.00
• B) $5.00
• C) $7.50
• D) $15.00
• E)P.S. for Alpha.

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