EPS, P/E Ratio, and Market Price. Harris Corporation wants to acquire Logo Corporation by exchanging 1.6 shares of its stock for each share of Logo. Harris anticipates having the same P/E ratio...

EPS, P/E Ratio, and Market Price. Harris Corporation wants to acquire Logo Corporation by exchanging 1.6 shares of its stock for each share of Logo. Harris anticipates having the same P/E ratio subsequent to the merger as prior to it. The following financial data are given:

Harris    Logo

Net income                                        $500,000 $150,000

Shares                                                  100,000 25,000

Market price per share                  $35        $40

(a) What is the exchange ratio of market prices? (b) What is the EPS and the P/E ratio for each company? (c) What was the P/E ratio used in obtaining Logo? (d ) What is the EPS of Harris after the acquisition? (e) What is the expected market price per share of the merged company?