Tangshan Mining is attempting to acquire Zhengsen Mining. Here is selected finan

Question

Tangshan Mining is attempting to acquire Zhengsen Mining. Here is selected financial data: Item Tangshan Mining Zhengsen Mining Earnings available for common stock $12,000,000 $2,000,000 Number of shares of stock outstanding 1,500,000 60,000 Market price per share $100 $120 Tangshan Mining has sufficient authorized but unissued shares to do the proposed merger. 1. Calculate the EPS of Tangshan Mining and Zhengsen Mining before the merger. 2. If the ratio of exchange is 1.8, what will be the EPS of the merged company?

Explanation / Answer

1) Tangshan Mining Zhengsen Mining Earning $ 12,000,000.00 $ 2,000,000.00 No of Share 1,500,000.00 60,000.00 Market Price per Share $ 100.00 $ 120.00 EPS $ 8.00 $ 33.33 Assuming no synergy in Earning after merger 2) Earning after Merger $ 14,000,000.00 No of share Outstanding 1,608,000.00 after Merger EPS of Merged Company $ 8.71

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