Use the Following Information to Answer the Question(s)below

Multiple Choice

Use the following information to answer the question(s) below.
Rearden Metal has earnings per share of $2.It has 10 million shares outstanding and is trading at $20 per share.Rearden Metal is thinking of buying Associated Steel,which has earnings per share of $1.25,4 million shares outstanding,and a price per share of $15.Rearden Metal will pay for Associated Steel by issuing new shares.There are no expected synergies from the transaction.
-If Rearden offers an exchange ratio such that,at current pre-announcement share prices for both firms,the offer represents a 20% premium to buy Associated Steel,then the actual premium Rearden will pay will be closest to:

A) 14.7%.
B) 18.0%.
C) 20.0%.
D) 22.4%.