Consider the following information for two all-equity firms, A and B: Total earnings Shares outstanding Price per share Firm A $3,000 600 $70 Firm B $1,100 400 $15 Firm A is acquiring Firm B by exchanging 100 of its new shares for all the shares in B. 1. What is the cost of the merger if the merged firm is worth $63,000? (the number of shares of the merged firm is 600 + 100 = 700 shares) 2. What will happen to the Merged Firm's Earning Per Share (EPS)? 3. What will happen to the Merged Firm's Price Earnings Ratio (PER)? Answers 11 Value of Merged firm # of share of Merged firm Value of share of Merged Firm # of Exchanged shares Cost of the merger 21 Earning Firm A Earning Firm B Total Earning # of share of Merged firm EPS 31 Value of share of Merged Firm EPS PER