Consider the following premerger information about Firm A and Firm B:Firm AFirm B$2,700$9002001,000$ 29 $ 33Total earningsShares outstandingPrice per shareAssume that Firm A acquires Firm B via an exchange of stock at a price of $35 for eachshare of B's stock. Both A and B have no debt outstanding.a.What will the earnings per share, EPS, of Firm A be after the merger? (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)What will Firm A's price per share be after the merger if the market incorrectlyanalyzes this reported earnings growth (that is, the price-earnings ratio does notchange)? (Do not round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.)What will the price-earnings ratio of the postmerger firm be if the market correctlyanalyzes the transaction? (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)If there are no synergy gains, what will the share price of A be after the merger? (Dod-1. not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)C.d-2.If there are no synergy gains, what will the price-earnings ratio be? (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a.b.C.d-1.d-2.Answer is complete but not entirely correct.EPSPrice persharePrice-earningsPrice persharePrice-earnings$2.9040.53 x10.0028.689.89timestimes

Price earnings ratio is computed by following formula-Price earnings ratio = MPS ÷ EPSwhere,MPS =…

Answered: a. b. C. d- 1. d- 2. Answer is complete…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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a. b. C. d- 1. d- 2. Answer is complete but not entirely correct. EPS Price per share Price- earnings Price per share Price- earnings S S $ 2.90 40.53 10.00 28.68 9.89 times times