Accounting Rules Now Require That M&A Investment Banking and Legal

question 24

Multiple Choice

Accounting rules now require that M&A investment banking and legal fees be expensed in the year they are incurred. These fees amount to 1% of the size of the deal, and at year end an all cash deal closed for $50 billion for Arch Ltd. to acquire Coal Inc. Arch has one billion shares outstanding and earned $2 billion excluding the merger costs mentioned above. How would this affect Arch's earnings per share?

• A) Arch's EPS would be $(3.00 per share.
• B) Arch's EPS would be $1.50 per share.
• C) Arch's EPS would be $1.95 per share.
• D) Arch's EPS would be $2.00 per share.
• E) Arch's EPS would be $5.00 per share.

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