Question

pk inc. wants to acquire rk inc. there is no synergy benefit or advantage available for this merger. however, the details are as follows: company eat mps shares outstanding pk $ 700,000.00 21 rk $ 140,000.00 17 125,000 if the merger takes place, determine the eps after merger. (a) $2.09 (b) $2.33 (c) $1.12 (d) $1.98

Answer 1

To calculate the EPS after the merger, combine the EAT of both companies ($840,000) and divide by the total shares outstanding (250,000), resulting in an EPS of $3.36, which does not match any of the provided options.

Step-by-step explanation:

To determine the earnings per share (EPS) after the merger of PK Inc. and RK Inc., we first need to calculate the combined earnings after tax (EAT) and the total number of shares outstanding post-merger.

The sum of the EAT of both companies is $700,000 (PK Inc.) + $140,000 (RK Inc.) = $840,000. After the merger, the total number of shares outstanding will be the sum of both companies' shares: 125,000 (PK Inc.) + 125,000 (RK Inc.) = 250,000 shares.

To find the EPS after the merger, we divide the combined EAT by the new total number of shares outstanding:

EPS = Combined EAT / Total shares outstanding = $840,000 / 250,000 = $3.36

However, this result is not listed in the provided options (A) $2.09, (B) $2.33, (C) $1.12, (D) $1.98, suggesting there might be an error in the initial information or the answer choices.