Tangshan Mining Is Attempting to Acquire Zhengsen Mining

question 173

Multiple Choice

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. If the ratio of exchange is 1.8, what will be the EPS of the merged firm?

• A) $1.00
• B) $1.029
• C) $1.078
• D) $2.00

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Definitions:

Penetration Pricing

A pricing strategy where a new product is introduced to the market at a significantly lower price than the competition to gain market share quickly.

Price Skimming

A pricing strategy where a firm charges the highest initial price that customers are willing to pay and then lowers it over time.

Fixed Costs

Expenses that do not change in the short term, regardless of the level of production or sales activity, such as rent or salaries.

Variable Costs

Costs that vary directly with the level of production or sales, such as materials and labor.