Question

help with all 3 please

QUESTION 15 ABBA NABA Before Merger ABBA Before Merger After Merger S 5.00 20.00 8.00 15,000 EPS $ 3.00 Price Per Share 30.00 Price Earnings (P/E) 11.50 No of Shares 30,000 Total Outstanding Earnings $80,000 Total Value Use this information to answer this question What is the number of shares in the new firm? $40.000 O A 20,000 OB 30,000 O C.40,000 OD 45,000 O E none

Answer 1

1 Ans	Option (C) 40,000
	No. of Share in the new Firm = No. of Sahres in NABA Limited + No. of Shares alloted to ABBA
	No. of Shares alloted to ABBA = Market Value of ABBA / Price per Share of NABA
	No. of Shares alloted to ABBA = (15,000 Shares * $ 20 per Share) / $ 30
	No. of Shares alloted to ABBA = $ 300,000 / $ 30
	No. of Shares alloted to ABBA = 10,000 Shares
	No. of Share in the new Firm = No. of Sahres in NABA Limited + No. of Shares alloted to ABBA
	No. of Share in the new Firm = 30,000 Shares + 10,000 Sahres
	No. of Share in the new Firm = 40,000 Shares
2 Ans	Option (C) $ 3
	EPS after Merger = Total Earnings of New Firm / No. of Sahres Outstanding in New Firm
	Total Earnings of New Firm = Earnings of NABA + Earnings of ABBA
	Total Earnings of New Firm = $ 80,000 + $ 40,000
	Total Earnings of New Firm = $ 120,000
	EPS after Merger = Total Earnings of New Firm / No. of Sahres Outstanding in New Firm
	EPS after Merger = $ 120,000 / 40,000
	EPS after Merger = $ 3
3 Ans	Option (D) $ 1,200,000
	Total Value of Merged Firm = No. of Shares in Merged Firm * Price per Share
	Total Value of Merged Firm = 40,000 * $ 30
	Total Value of Merged Firm = $ 1,200,000