Paula Company wants to acquire David Company. Relevant data follow:
|
Paula
|
David
|
|
Net income
|
$40,000
|
$25,000
|
|
Shares outstanding
|
20,000
|
5,000
|
Paula issues its shares to make the acquisition. The ratio of exchange is 2.5. (a) What is the earnings per share of the merged company based on the original shares of each company? (b) What is the earnings per share of Paula? (c) What is the earnings per share of David?