Delta Company wants to buy and merge with Gamma Company. Delta company is trading for $70 per share and Gamma company for $35 per share. Both are all equity firms and each have a million shares outstanding. Delta company has an EPS of $2.00 and Gamma company has an EPS of $3.50.

1. If the companies merge and Delta acquires Gamma for their current market value in an exchange of stock, what is the post merger EPS?

2. Lets say Delta pays a 30% premium to buy Gamma. What amount of shares of Delta will be needed to purchase Gamma company? Now what is the EPS if Delta pays the 30% premium?

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