Whipple Industries Is Considering the Acquisition of Blanchard Company in a Stock-For-Stock

Multiple Choice

Whipple Industries is considering the acquisition of Blanchard Company in a stock-for-stock exchange. Selected financial data for the two companies is shown below. No synergy is expected in this merger. $$\begin{array} { l r r } & \text { Whipple } & \text { Blanchard } \\\text { Sales (millions) } & \$ 150 & \$ 30 \\\text { Net income (millions) } & \$ 25 & \$ 3.5 \\\text { Common shares outstanding (millions) } & 8 & 2 \\\text { Earnings per share } & \$ 3.125 & \$ 1.75 \\\text { Dividends per share } & \$ 1.50 & \$ 0.75 \\\text { Common stock price per share } & \$ 40 & \$ 19.50\end{array}$$ ? Determine the post-merger earnings per share if the Blanchard company shareholders accept an offer of $22 per share in a stock-for-stock exchange.

A) $2.85
B) $3.175
C) $3.13
D) $1.75