(The following information relates to Questions 16 and 17)

Consider the following information for two all-equity firms, A and B:

	Firm A	Firm B
Total earnings	$1,000	$400
Shares outstanding	100	80
Price per share	$80	$30

Firm A is acquiring Firm B by exchanging 25 of its shares for all shares in B

16. What is the equivalent cash cost of the merger if the merged firm is worth $11,000?

____

1. $2,000
2. $2,200
3. $2,400
4. $2,800

17. What is Firm As new P/E ratio after merger?

____

1. 8.76
2. 8.00
3. 7.86
4. 6.78