In a scenario where an acquirer with EPS of $4 and 100 million shares acquires a target with EPS of $2 and 50 million shares at a 1:1 exchange ratio, what is the pro forma EPS?

To determine the pro forma earnings per share (EPS) after the acquisition, we first need to calculate the total earnings of both the acquirer and the target, as well as the total number of shares outstanding after the acquisition.

The acquirer has an EPS of $4 and 100 million shares, which means its total earnings can be calculated as follows:

Total earnings of the acquirer = EPS * Number of shares

= $4 * 100 million

= $400 million.

The target has an EPS of $2 and 50 million shares, leading to its total earnings being:

Total earnings of the target = EPS * Number of shares

= $2 * 50 million

= $100 million.

Next, we combine the total earnings of both companies to get the total pro forma earnings:

Total pro forma earnings = Total earnings of the acquirer + Total earnings of the target

= $400 million + $100 million

= $500 million.

After the acquisition, the exchange ratio is 1:1, which means the acquirer will issue new shares to the target's shareholders equivalent to the 50 million shares they have. Therefore, the total number of shares outstanding after the acquisition will be:

Total shares after acquisition = Shares