Problem $21-8$ Mergers Gains $($LO$2)$

Acquiring Corporation is considering a takeover of Takeover Target Incorporated Acquiring has $24$ million shares outstanding, which

sell for $$25$ each. Takeover Target has $12$ million shares outstanding, which sell for $$18$ each. The merger gains are estimated at $$36$

million.

If Acquiring Corporation has a price$-$earnings ratio of $15$ and Takeover Target has a P$/$E ratio of $10,$ what should be the P$/$E ratio of the

merged firm? Assume in this case that the merger is financed by an issue of new Acquiring Corporation shares. Takeover Target will

get one Acquiring share for every two Takeover Target shares held.

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

P$/$E