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

question 52

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 actual premium Rearden will pay will be closest to:

• A)14.7%.
• B)18.0%.
• C)20.0%.
• D)22.4%.

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Definitions:

Average Wages

The mean earnings of workers in a specific region, industry, or occupation, reflecting the general level of compensation.

Male Workers

Individuals who are male and participate in the workforce, contributing to the labor supply in various industries and sectors.

Female Workers

Female workers are individuals who identify as female and participate in the labor force, either through employment or seeking employment.

Labor-market Discrimination

Unfair treatment of workers based on personal characteristics unrelated to their job performance or skills, such as race, gender, or age.