Fashion Acquisitions. During the 1960s, many conglomerates were created by firms that were enjoying a high price/earnings ratio (P/E). These firms then used their highly valued stock to acquire other firms that had lower P/E ratios, usually in unrelated domestic industries. Conglomerates went out of fashion during the 1980s when they lost their high P/E ratios, thus making it more difficult to find other firms with lower P/E ratios to acquire During the 1990s, the same acquisition strategy was possible for firms located in countries where high P/E ratios were common compared to firms in other countries where low P/E ratios were common. Consider the hypothetical firms in the pharmaceutical industry shown in the table below. (Click on the icon to import the table into a spreadsheet.) Modern American wants to acquire ModoUnico. It offers 5,500,000 shares of Modern American, with a current market value of $200,000,000 and a 10% premium on ModoUnico's shares, for all of ModoUnico's shares Company ModoUnico Modern American P/E ratio 20 40 Number of shares 10,000,000 10,000,000 Market value per share $20.00 $40.00 Earnings $10,000,000 $10,000,000 EPS $1.00 $1.00 Total Market Value $200,000,000 $400,000,000