Company A has earrings per share of $3 with 20 million shares outstanding. The current market price of Company As Stock is $40 per share. Company A is in process of acquiring Company B., which has earnings per share of $1.50, 4 million of common stock shares. Currently, Company Bs stock trades at $25. The acquisition will be done 100% by stock issue by Company A. Exchange ratio will be set in a way that, at current pre-announcement share prices for both firms, the offer represents a 10% premium to buy Company B. What will be the price per share of Company A immediately after the announcement of acquisition? What will be subsequent price action in both Company As and Company Bs stocks? Explain briefly

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