RED Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. RED 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. RED Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If RED pays no premium to buy Associated Steel, then RED's earnings per share after the merger will be closest to: O A. $1.85 O B. $1.90 O C. $2.00 OD. $2.25
RED Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. RED 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. RED Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If RED pays no premium to buy Associated Steel, then RED's earnings per share after the merger will be closest to: O A. $1.85 O B. $1.90 O C. $2.00 OD. $2.25
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Ee 156.
Transcribed Image Text:RED Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. RED 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. RED Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from
the transaction.
If RED pays no premium to buy Associated Steel, then RED's earnings per share after the merger will be closest to:
O A. $1.85
B. $1.90
O C. $2.00
O D. $2.25
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