The Shareholders of Jolie Company Have Voted in Favor of a Buyout

question 67

Multiple Choice

The shareholders of Jolie Company have voted in favor of a buyout offer from Pitt Corporation. Jolie has a price-earnings ratio of 6, earnings of $230,000, and 60,000 shares outstanding. Pitt has a price-earnings ratio of 12, earnings of $660,000, and 125,000 shares outstanding. Jolie's shareholders will receive one share of Pitt stock for every three shares they hold in Jolie. Assume the NPV of the acquisition is zero. What will the post-merger PE ratio be for Pitt?

• A) 10.76
• B) 9.20
• C) 9.84
• D) 10.32
• E) 11.21

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Definitions:

Emotional Responses

The physiological, behavioral, and psychological reactions that occur in response to stimuli perceived as emotionally significant.

Physiological Responses

Automatic reactions of the body to internal or external events or stimuli.

Behavioural Responses

Reactions exhibited by individuals in response to external or internal stimuli.

Stress

A physical or psychological response to internal or external pressures, challenges, or threats, often characterized by feelings of tension, anxiousness, or overwhelm.