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

question 50

Multiple Choice

The shareholders of Jolie Company have voted in favor of a buyout offer from Pitt Corporation.Information about each firm is given here: $$\begin{array} { l r r } & \underline { \text { Jolie } } & \underline { \text { Pitt } } \\\text { Price-earnings ratio } & 6 & 12 \\\text { Shares outstanding } & 62,000 & 124,000 \\\text { Earnings } & \$ 210,000 & \$ 630,000\end{array}$$ 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)8.4
• B)9.2
• C)9.8
• D)10.5
• E)11.2

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Definitions:

Behaviorism

A theory in psychology that emphasizes the importance of observable actions and behaviors over internal processes.

Experimental Method

is a research methodology where the researcher manipulates one variable and controls/randomizes the rest of the variables to study cause-and-effect relationships.

Cognitive Psychologist

A professional who studies mental processes including how people think, perceive, remember, and learn, often focusing on areas such as problem-solving, decision-making, and memory.