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Baker Corp and Howell Enterprises

Assume the following financial data for the Baker Corp and Howell Enterprises

Baker Howell

Total Earnings 400,000 1,200,000

# of shares of stock outstanding 200,000 1,000,000

Earnings Per Share $2 $1.20

Price Earnings Ratio 12X 20X

Market Price per share $24 $24

A. If all shares of Barker Corporation are exchanged for those of Howell Enterprises on a share for share basis, what will post merger earnings per share be for Howell Enterprises? Use an approach similar to the table.

B. Explain why earnings per share of Howell Enterprises changed

C. Can we necessarily assume that Howell Enterprises is better off or worse off?

Solution Preview

Assume the following financial data for the Baker Corp and Howell Enterprises

Baker Howell

Total Earnings 400,000 1,200,000

# of shares of stock outstanding 200,000 1,000,000

Earnings Per ...

Solution Summary

This solution is comprised of a detailed explanation to answer the request of the assignment of more than 150 words of text.

$2.19