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Firm A Firm T Price per share $ 90.00 $10.00 Total earnings $ 600.00 $100.00 Share outstanding 100. $40. Total Value $ 9,000.00 $400.00 Company

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Firm A Firm T Price per share $ 90.00 $10.00 Total earnings $ 600.00 $100.00 Share outstanding 100. $40. Total Value $ 9,000.00 $400.00 Company A now acquires T by offering one new share of A for every four shares of T. 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? Now suppose that the merger really does increase the value of the combined firms by $500, what is the price-earnings ratio of A's stock after the merger? Again, suppose that the merger will increase the value of the combined firms by $500. What is the final merger premium does Company A pay to Company T

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