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Find earning per share of merged company for original shares

Earnings per Share of Merged Company. 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?

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