Essex Industries is considering the acquisition of Twinsburg Company in a stock-for-stock exchange. The following financial data are available on both companies. (Assume no synergy is expected with this merger.) Calculate answers to nearest 0.001. Essex Twinsburg Sales $500 million $50 million Net income $40 million $3.74 million Common shares outstanding 5 million 1 million Earnings per share $8.00 $3.74 Dividends per share $3.00 $1.00 Common stock market price $64 $24 Price/earnings ratio 8 6.42 Calculate the post-merger earnings per share if the exchange ratio is 0.4 shares of Essex for each share of Twinsburg. (Assume total post-merger earnings are $43,740,000.) A) $8.10
B) $7.33
C) $7.29
D) $7.42
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