Castles in the Sand currently sells at a price-earnings multiple of 10. The firm has 2 million shares outstanding and sells at a price per share of $40. Firm Foundation has a P/E multiple of 8. has 1 million shares outstanding, and sells at a price per share of $20. a. If Castles acquires the other firm by exchanging one of its shares for every two of Firm Foundation, what will be the earnings per share of the merged firm? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price per share for Castle? (Do not round intermediate calculations.) c. What would be Firm Foundation's value of stock post merger? (Do not round intermediate calculations. Enter your answer in millions.) d. What should be the P/E of the new firm if the merger has no economic gains? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. Calculate Castles price per share if the market does not realize that the P/E ratio of the merged firm ought to differ from Castles premerger ratio. (Do not round intermediate calculations.) f. How are the gains from the merger split between shareholders of the two firms if the market is fooled as in part (e)? (Enter your answers in millions.) Answer is complete but not entirely correct. a. S 4.20 40 b. a C. S 40 x million d. Earnings per share Price per share Value of stock P/E Price per share Castles in the Sand (CS) Firm Foundation (FF) 9.50 e. $ 42 1. 4 million un 1 million