Assume the following financial data for the Noble Corporation and Barnes Enterprises:
|
Noble Corporation
|
Barnes Enterprises
|
|
Total earnings
|
$1,820,000
|
$5,620,000
|
|
Number of shares of stock outstanding
|
650,000
|
2,810,000
|
|
Earnings per share
|
$2.80
|
$2.00
|
|
Price-earnings ratio (P/E)
|
20×
|
28×
|
|
Market price per share
|
$56
|
$56
|
a. If all the shares of the Noble Corporation are exchanged for those of Barnes Enterprises on a share-for-share basis, what will postmerger earnings per share be for Barnes Enterprises? Use an approach similar to that in Table 20-3.
b. Explain why the earnings per share of Barnes Enterprises changed.
c. Can we necessarily assume that Barnes Enterprises is better off after the merger?
Please explain answers