Mazin's Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized

Question:

Mazin's Café is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table.
Item Mazin's Café Victory Club
Earnings available for common stock...........US$20,000................US$8,000
Number of shares of outstanding...20,000.....................4,000
Market price per share.................................US$ 12...................US$ 24
Mazin's Cafe has sufficient authorized but unissued shares to carry out the proposed merger.
a. If the ratio of exchange is 1.8, what will be the earnings per share (EPS) based on the original shares of each firm?
b. Repeat part a if the ratio of exchange is 2.0.
c. Repeat part a if the ratio of exchange is 2.2.
d. Discuss the principle illustrated by your answers to parts a through c.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...