Question
Companies A and B are valued as follows: Company A Company B Shares outstanding 2,000 1,000 Earing per share 10 10 Price per share 100
Companies A and B are valued as follows:
| Company A | Company B | |
| Shares outstanding | 2,000 | 1,000 |
| Earing per share | 10 | 10 |
| Price per share | 100 | 50 |
Company A now acquires B by offering one (new) share of A for every two shares of B (that is, after the merger, there are 2500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?
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The Economics Of Money Banking And Financial Markets
Authors: Frederic S. Mishkin
11th Global Edition
1292094184, 978-1292094182
