Mergers and EPS Consider the following information for two all-equity firms, A and B: Firm A Firm

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Mergers and EPS Consider the following information for two all-equity firms, A and B:

Firm A

Firm B

Total 3,000 1,000 earnings (€)
Shares outstanding 600 400 Share price (€)
70 15 Firm A is acquiring Firm B by exchanging 100 of its shares for all the shares in B. What is the cost of the merger if the merged firm is worth €63,000? What will happen to Firm A’s EPS? To its P/E ratio?

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