World Enterprises is determined to report earnings per share of $2.90. It therefore acquires the Wheelrim and Axle Company. There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.90 earnings per share objective. a. Complete the table below for the merged firm. b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? c. What is the cost of the merger to World Enterprises? d. What is the change in the total value of the World Enterprises shares that were outstanding before the merger? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Complete the table below for the merged firm. Note: Do not round intermediate calculations. Round "Price per share" and "Price-earnings ratio" to 2 decimal places and other answers to the nearest whole number. World Enterprises Wheelrim and Axle Merged Firm Earnings per share $ 2.00 $ 3.00 $ 2.90 Price per share $ 30 $ Price-earnings ratio 15 15 5 Number of shares 230,000 330,000 Total earnings $ 460,000 $ 990,000 Total market value $ 6,900,000 $ 4,950,000 < Required A Required B > < Prev 4 of 10 Next >

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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World Enterprises is determined to report earnings per share of $2.90. It therefore acquires the Wheelrim and Axle Company. There
are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to
ensure its $2.90 earnings per share objective.
a. Complete the table below for the merged firm.
b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle?
c. What is the cost of the merger to World Enterprises?
d. What is the change in the total value of the World Enterprises shares that were outstanding before the merger?
Complete this question by entering your answers in the tabs below.
Required A
Required B Required C
Required D
Complete the table below for the merged firm.
Note: Do not round intermediate calculations. Round "Price per share" and "Price-earnings ratio" to 2 decimal places and
other answers to the nearest whole number.
World
Enterprises
Wheelrim
and Axle
Merged Firm
Earnings per share
$
2.00 $
3.00 $
2.90
Price per share
$
30 $
Price-earnings ratio
15
15
5
Number of shares
230,000
330,000
Total earnings
$
460,000 $
990,000
Total market value
$
6,900,000 $ 4,950,000
< Required A
Required B >
< Prev
4 of 10
Next >
Transcribed Image Text:World Enterprises is determined to report earnings per share of $2.90. It therefore acquires the Wheelrim and Axle Company. There are no gains from merging. In exchange for Wheelrim and Axle shares, World Enterprises issues just enough of its own shares to ensure its $2.90 earnings per share objective. a. Complete the table below for the merged firm. b. How many shares of World Enterprises are exchanged for each share of Wheelrim and Axle? c. What is the cost of the merger to World Enterprises? d. What is the change in the total value of the World Enterprises shares that were outstanding before the merger? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Complete the table below for the merged firm. Note: Do not round intermediate calculations. Round "Price per share" and "Price-earnings ratio" to 2 decimal places and other answers to the nearest whole number. World Enterprises Wheelrim and Axle Merged Firm Earnings per share $ 2.00 $ 3.00 $ 2.90 Price per share $ 30 $ Price-earnings ratio 15 15 5 Number of shares 230,000 330,000 Total earnings $ 460,000 $ 990,000 Total market value $ 6,900,000 $ 4,950,000 < Required A Required B > < Prev 4 of 10 Next >
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