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Question:Question: Consider the following premerger information about Firm A and Firm B:
Question:Question:Consider the following premerger information about Firm A and Firm B:
Firm AFirm BTotal earnings$2,100 $600 Shares outstanding 1,100 300 Price per share$39 $43
Assume that Firm A acquires Firm B via an exchange of stock at a price of $45 for each share of B's stock. Both A and B have no debt outstanding.
a. What will the earnings per share, EPS, of Firm A be after the merger? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
EPS $
b. What will Firm A's price per share be after the merger if the market incorrectly analyzes this reported earnings growth (that is, the price-earnings ratio does not change)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Price per share $
c. What will the price−earnings ratio of the postmerger firm be if the market correctly analyzes the transaction? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Price−earnings times
d-1. If there are no synergy gains, what will the share price of A be after the merger?
