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Companies A and B are valued as follows: A B # of shares 2000 1000 Earnings per share $10 $10 Share price $100 $50 Both

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Companies A and B are valued as follows: A B # of shares 2000 1000 Earnings per share $10 $10 Share price $100 $50 Both companies are 100% equity financed. Company A now acquires B by offering two (new) shares of A for every three shares of Company B. Suppose that the merger really does increase the value of the combined firms by $18,000. What is the net gain to target shareholders? A. $4,000 B. $0 C. $17,000 D. $1,000 O E. None of the above

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