Companies a and B Are Valued as Follows

question 47

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 2500 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)10.0

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Continuing Education

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