Tangshan Mining Is Attempting to Acquire Zhengsen Mining

question 101

Essay

Tangshan Mining is attempting to acquire Zhengsen Mining. Selected financial data is presented for both companies in the table below: Tangshan Mining has sufficient authorized but unissued shares to carry out the proposed merger.
(a) Calculate the EPS of Tangshan Mining and Zhengsen Mining before the merger.
(b) If the ratio of exchange is 1.8, what will be the earnings per share of the merged company?
(c) Repeat part (a) if the ratio of exchange is 2.0.
(d) Repeat part (a) if the ratio of exchange is 2.2
(e) discuss the principal illustrated by your answers to parts (a) through (d)

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Definitions:

Efficient Scale

The level of production that minimizes the average total cost of producing a product or service.

Long-Run Equilibrium

A state in which all firms in a market are making zero economic profit, leading to a situation where no firms enter or exit the industry.

Long-Run Equilibrium

A state in which all aspects of the economy, including supply and demand, are in balance, and all economic agents have fully adjusted to any changes.

Decrease in Demand

refers to a situation where consumers' desire and ability to purchase a product or service diminishes, leading to a downward shift in the demand curve.