Sunlite Is Considering a Merger with Velo Blind by Offering

Sunlite is considering a merger with Velo Blind by offering the equivalent of $21 a share in a stock-for-stock transaction. Sunlite's current common stock price is $30 a share and Velo's is $17. Other financial data on the two firms is as follows: $$\begin{array} { l r r } & \text { Sunlite } & \text { Velo Blind } \\\text { Sales (millions) } & \$ 100 & \$ 20 \\\text { Net income (millions) } & \$ 10 & \$ 3 \\\text { No. of shares outstanding (millions) } & 8 & 1.2 \\\text { Earnings per share } & \$ 1.25 & \$ 2.50\end{array}$$ ? Assuming no economies of scale or synergistic benefits, what will be the post-merger earnings per share?

A) $1.47
B) $1.41
C) $1.50
D) $1.25

Correct Answer:

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