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

question 17

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 the price per share of the combined corporation after the merger will be closest to:

• A)$19.12.
• B)$20.00.
• C)$26.00.
• D)$17.20.

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Definitions:

New Product

An item or service that has been recently developed or introduced to the market.

Organizing

Process of blending human and material resources through a formal structure of tasks and authority; arranging work, dividing tasks among employees, and coordinating them to ensure implementation of plans and accomplishment of objectives.

Anticipate Future

The act of predicting or expecting upcoming events or trends, allowing individuals or organizations to prepare or adjust accordingly.

Costly Mistakes

Costly Mistakes are errors or poor decisions that result in significant financial loss or damage.