Companies a and B Are Valued as Follows

question 45

Multiple Choice

Companies A and B are valued as follows:

Company A now acquires B by offering one (new) share of A for every two shares of B (that is, after the merger, there are 2,500 shares of A outstanding) . If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

• A)7.5
• B)8.3
• C)10
• D)5

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Definitions:

Situational Attribution

The process of explaining someone's behavior based on external factors or the context of the situation rather than on internal characteristics.

Milgram's Study

A landmark psychological experiment conducted by Stanley Milgram which demonstrated people's willingness to obey authority, even to the extent of causing harm to others.

Obedience

The act of following orders or guidelines set by others, often studied in psychology as a facet of social influence.

Cognitive Schema

Mental structures that an individual uses to organize knowledge and guide cognitive processes and behavior.