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    Noble Corporation and Barnes Enterprises merger

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    Assume the following financial data for Noble Corporation and Barnes Enterprises.

    Noble Corporation Barnes Enterprises
    Total Earnings $1,200,000 $3,600,000
    Number of shares of stock outstanding 600,000 2,400,000
    Earnings per share $2.00 $1.50
    Price-earnings 24 X 32 X
    Market price per share $48 $48

    a. If all the shares of 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?
    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.

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    Solution Preview

    Please find attached Excel file for proper format and formulas.


    Part (a)
    Earnings of Noble Corporation 1,200,000
    Earnings of Barnes Enterprises 3,600,000

    Combined Earnings 4,800,000

    Total Shares after merger

    Shares of Barnes ...

    Solution Summary

    Noble Corporation and Barnes Enterprises mergers are examined.