Consider the following premerger information about Firm A and Firm B:

Firm A Firm B

Total earnings $940 $630

Shares outstanding 590 280

Price per share $ 45 $20

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? 2 points

b. What will firm A s price per share be after the merger if the priceearnings ratio does not change? 3 points

c.1. If there are no synergy gains, what will the share price of A be after the merger? 3 points

c.2. If there are no synergy gains, what will the priceearnings ratio be? 2 points

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. 2 points