Question: Question content area top Part 1 Expected EPS Merger decision Graham & Sons wishes to evaluate a proposed merger into the RCN Group. Graham had
Question content area top
Part 1
Expected
EPSMerger
decisionGraham & Sons wishes to evaluate a proposed merger into the RCN Group. Graham had
2019
earnings of
$150,000,
has
100,000
shares of common stock outstanding, and expects earnings to grow at an annual rate of
7%.
RCN had
2019
earnings of
$800,000,
has
200,000
shares of common stock outstanding, and expects its earnings to grow at
3%
per year.
a.Calculate the expected earnings per share (EPS) for Graham & Sons for each of the next 5 years
(2020-2024)
without the merger.
b.What would Graham's stockholders earn in each of the next 5 years
(2020-2024)
on each of their Graham shares swapped for RCN shares at a ratio of
0.5
share of RCN for 1 share of Graham?
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