Consider Two Firms,Left Company and Right Enterprises,both with Earnings of $2.50

question 73

Multiple Choice

Consider two firms,Left Company and Right Enterprises,both with earnings of $2.50 per share and 15 million shares outstanding.Left is a mature company with few growth opportunities and a stock price of $7 per share.Right is a new firm with much higher growth opportunities and a stock price of $16 per share.Assume Right acquires Left using its own stock and the takeover adds no value.What is the change in Right's earnings per share as a result of the acquisition?

• A)$0.98
• B)$3.21
• C)-$0.76
• D)$0
• E)$2.50

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Definitions:

Fraud

Deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.

Employee Fraud

Dishonest activities conducted by employees to provide them with an advantage, financial or otherwise, at the expense of their employer.

Inventories

Goods and materials that a business holds for the purpose of resale or production.

Manufacturers

Manufacturers are entities engaged in the transformation of raw materials or components into finished goods that are sold to consumers, businesses, or other manufacturers.