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EPS and merger terms Cleveland Corporation is interested in acquiring Lewis Tool Company by swapping 0.41 share of its stock(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

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Answer #1

a) Number of shares of stock cleaveland will have to issue in order to make the proposed merger.

= Number of shares of lewis * 0.41

= 19000 * 0.41

= 7790 new shares

b) If the earnings for each firm remains unchenged then the post merger earning per share will be-

= ( cleveland earnings + lewis earnings) / Total number of shares of cleveland after merger

= (19300 + 51000) / (51000 + 7790)

= $4.15

c) The amount, effcetively, that has been lost for each of the original share of lewis stock

= Earning per share calculated in part B * 0.41

= $4.15 * 0.41

= $1.70

d) The amount, effectively that has been earned on the behalf of each of the original share of cleveland corporation stock

= $4.15

Reason = There is no change in respect from the figure for the merged firms.

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