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

question 47

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 pays no premium to buy Associated Steel, then Rearden's earnings per share after the merger will be closest to:

• A) $1.85
• B) $1.90
• C) $2.00
• D) $2.25