Consider Two Firms,Bob Company and Cat Enterprises,both with Earnings of $10

question 65

Multiple Choice

Consider two firms,Bob Company and Cat Enterprises,both with earnings of $10 per share and 5 million shares outstanding.Cat is a mature company with few growth opportunities and a stock price of $25 per share.Bob is a new firm with much higher growth opportunities and a stock price of $40 per share.Assume Bob acquires Cat using its own stock and the takeover adds no value.What is the change in Bob's earnings per share as a result of the acquisition?

• A)$2.31
• B)-$3.85
• C)$10.00
• D)$0
• E)$5.00

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