Question 2. FreemanCare Inc , which maintains and runs health maintenance organizations , has a price /book value ratio of 4. It plans to merge with NewcombCare Inc , a corporation that owns and runs hospitals , and has a price /book value ratio of 2. Assuming that FreemanCare's equity value is three times that of NewcombCare's equity value , and that the companies adopt pooling to account for the acquisition , estimate the price /book value ratio after the merger . (Pooling essentially earns that the book values of the two firms are added up to arrive at the book value of the combined firm ) Question 3. Walgreen , a large retail drugstore chain in the United States , reported net income of $221 million in 1993 on revenues of $8298 million . It paid out 31 % of its earnings as dividends a payout ratio that is expected to remain level from 1994 to 1998 , during which period earnings growth is expected to be 13.5 %. After 1998 , earnings growth is expected to decline to 6%, and the dividend i payout ratio is expected to increase to 60 %. The beta is 1.15 and this figure is expected to remain unchanged . The Treasury bond rate is 7%. a. Estimate the price/sales ratio for Walgreens, assuming its profit margin remains unchanged at 1993 levels. b . How much of this price/sales ratio can be attributed to extraordinary growth