Assume that Firm A acquires Firm B via an exchange of stock at a price of $24 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?

b. What will firm A 's price per share be after the merger if the price-earnings ratio does not change?

c.1. If there are no synergy gains, what will the share price of A be after the merger?

c.2. If there are no synergy gains, what will the price-earnings ratio be?

c.3. What does your answer for the share price tell you about the amount A bid for B? Was it too high? Too low? Explain.