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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