Use the Following Information to Answer the Question(s)below

question 41

Multiple Choice

Use the following information to answer the question(s) below.
Rearden Metal has earnings per share of $2.It has 10 million shares outstanding and is trading at $20 per share.Rearden Metal is thinking of buying Associated Steel,which has earnings per share of $1.25,4 million shares outstanding,and a price per share of $15.Rearden Metal will pay for Associated Steel by issuing new shares.There are no expected synergies from the transaction.
-If Rearden offers an exchange ratio such that,at current pre-announcement share prices for both firms,the offer represents a 20% premium to buy Associated Steel,then Rearden's earnings per share after the merger will be closest to:

• A)$1.84.
• B)$1.90.
• C)$2.00.
• D)$2.25.

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Definitions:

Double

A data type used in programming to represent floating point numbers with double the precision of the standard float type.

Float

A float refers to a floating-point number, which is a way of representing real numbers in computing that can handle fractions.

Precision

The degree of exactness with which a value is expressed or measured in computing and mathematics.

Numerical Accuracy

The degree to which the result of a computation conforms to the correct value, affected by various factors including floating-point representation and algorithmic design.