Question

v

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

	Noble Corporation			Barnes Enterprises
Total earnings	$	3,060,000		$	7,600,000
Number of shares of stock outstanding		850,000			3,800,000
Earnings per share	$	3.60		$	2.00
Price-earnings ratio (P/E)		20			36
Market price per share	$	72		$	72

If all the shares of the Noble Corporation are exchanged for those of Barnes Enterprises on a share-for-share basis, what will postmerger earn

Answer 1

Given,

Earnings of noble corporation = $3060000

Earnings of Barnes enterprises = $7600000

Shares of Noble corporation = 850000

Shares of Barnes enterprises = 3800000

Solution :-

Combined earnings = Earnings of noble corporation + Earnings of Barnes enterprises

= $3060000 + $7600000 = $10660000

Post merger shares = Shares of Noble corporation + Shares of Barnes enterprises

= 850000 + 3800000 = 4650000

Post merger earnings per share = Combined earnings Post merger shares

= $10660000 4650000 = $2.29 per share

Thus, post merger earnings per share for Barnes enterprises will be $2.29 per share.