Zieglar (z) makes a share exchange offer for michal (M), exchange ratio:

1. Prior to the bid, both companies had EPS of $0.10, $30m shares, and net after-tax income (NI) for ordinary shareholders of $3m. 

A’s NI is expected to grow at 20%, M’s NI is expected to grow at 10%. 

I. Determine earnings dilution in the five years following the acquisition. 

II. Calculate the maximum number of M’s share to issue to avoid dilution.

Answer rating: 100% (QA)

I Earnings dilution in the five years following the acquisition can be calculated by determining the amount of diluted earnings per share given the ex... View the full answer