Morgan Foods is considering the acquisition of Old Spaghetti Warehouse Inc.in a stock-for-stock exchange.
Selected financial data for the two companies is shown below.An immediate synergistic earnings benefit of $1.5 million is expected in this merger, due to cost savings.

Calculate the postmerger EPS if the Old Spaghetti shareholders accept an offer of $54 per share in a stock-for-stock exchange.
A)$3.04
B)$2.92
C)$3.29
D)$3.17

Question

Morgan Foods is considering the acquisition of Old Spaghetti Warehouse Inc.in a stock-for-stock exchange.
Selected financial data for the two companies is shown below.An immediate synergistic earnings benefit of $1.5 million is expected in this merger, due to cost savings.

Calculate the postmerger EPS if the Old Spaghetti shareholders accept an offer of $54 per share in a stock-for-stock exchange.
A)$3.04 
B)$2.92 
C)$3.29 
D)$3.17

Quizplus · Accepted Answer

ER = $54/$36 = 1.5
EPS = ($30 + $8 + $1.5)/[10 + 2(1.5)] = $3.04

Morgan Foods Is Considering the Acquisition of Old Spaghetti Warehouse