Assume the following financial data for the Wolf Corporation and Lamb Enterprises. a. If all the shares
Question:
a. If all the shares of the Wolf Corporation are exchanged for shares of the Lamb Enterprises on a share-for-share basis, what will post merger EPS be for Lamb Enterprises? Use an approach similar to Table 20-4.
Table 20-4
Total earnings: Small ($200,000) + Expand ($500,000).................. $700,000
Shares outstanding in surviving corporation:
Old (200,000) + New (50,000) ..................................................... . . 250,000
New EPS for Expand Corporation = $700,000/250,000 = $2.80
b. Explain why the EPS of Lamb Enterprises changed.
c. Can we necessarily assume that Lamb Enterprises is better or worse off?
Step by Step Answer:
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta