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P187 Ratio of exchange and EPS Marlas Cafe is attempting to acquire the Victory Club....

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Finance

P187 Ratio of exchange and EPS Marlas Cafe is attempting to acquire the Victory Club. Certain financial data on these corporations are summarized in the following table. Item Earnings available for common stock Number of shares of common stock outstanding Market price per share Marlas Cafe $20,000 20,000 $12 Victory Club $8,000 4,000 $24 Marlas 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.

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