Earnings per Share of Merged Company. Paula Company wants to acquire David Company. Relevant data follow: Paula     David Net income                        $40,000 $25,000 Shares outstanding        ...

Earnings per Share of Merged Company. Paula Company wants to acquire David Company. Relevant data follow:

Paula     David

Net income                        $40,000 $25,000

Shares outstanding         20,000 5,000

Paula issues its shares to make the acquisition. The ratio of exchange is 2.5. (a) What is the earnings per share of the merged company based on the original shares of each company? (b) What is the earnings per share of Paula? (c) What is the earnings per share of David?