Koala Technologies Is Considering the Acquisition of Laser Industries in a Stock-For-Stock

Multiple Choice

Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in this merger. $$\begin{array} { l r r } & \text { Koala } & \text { Laser } \\\text { Sales (millions) } & \$ 90 & \$ 10 \\\text { Net income (millions) } & \$ 9.4 & \$ 1.2 \\\text { Common shares outstanding (millions) } & 4.0 & 0.8 \\\text { Earnings per share } & \$ 2.35 & \$ 1.50 \\\text { Common stock (price per share) } & \$ 35.00 & \$ 27.00\end{array}$$ ? Calculate the postmerger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange.

A) $2.21
B) $2.25
C) $2.75
D) $2.23