Firm a Is Planning on Merging with Firm B

question 28

Multiple Choice

Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share. The after-merger earnings will be $6,500. What will the earnings per share be after the merger?

• A) $1.67
• B) $1.78
• C) $1.83
• D) $1.87
• E) $1.92

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Definitions:

Actual Output

The real production quantity completed within a specific period.

Standard Price

The pre-determined cost that is expected to be paid for a specific item or service under normal conditions.

Standard Labour Rate

The predetermined wage rate used for budgeting and variance analysis, representing the expected cost per hour of labor.

Standard Labour Hours

The predetermined amount of labor time that is expected to be necessary to produce one unit of a product or complete a process.