you are given the following info:

Total earnings firm a: $45,000 firm b: $40,000

shares outstanding 12,000 8,000

market price per share $60 $50

firm a will acquire firm b for a 3-4-5 exchange (3 shares of company a for 5 shares of company b) of stock. Assume there is an expected synergy of $4,000 in total earnings from the acquisition the market will value the combined firm with a P/E multiple which is an average of the current p/e ratios for the two firms.

Construct the above format for the combined firm and compute the benefit (loses) of the merger (as a %) for the shareholders of firm b.

-18.44% -17.36 -4.4 3.5 or 7.6%