Companies a and B Are Valued as Follows Company a Now Acquires B by Offering One (New) Share

question 8

Multiple Choice

Companies A and B are valued as follows: $\begin{array} { l c c } & \mathrm { A } & \mathrm { B } \\\text { Number of shares } & 2,000 & 1,000 \\\text { Earnings per share } & \$ 10 & \$ 10 \\\text { Share price } & \$ 100 & \$ 50\end{array}$ 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:

Adaptive Selling

The practice of customizing sales approach to the specific needs and behaviors of individual customers or situations.

Sales Force

A dedicated team or group within a company responsible for conducting sales and building relationships with prospects and customers to drive revenue.

Market Conditions

The state of the economy and the conditions of the business and consumer sectors that influence supply, demand, and pricing.

Equalized Workload Method

A market-based sales force sizing approach in which sales managers use sales-activity calculations to determine proper staffing levels.