Question

Consider the following information for two all-equity firms, Firm A Firm B Total earnings $1,000 $400...

Consider the following information for two all-equity firms,

Firm A

Firm B

Total earnings

$1,000

$400

Shares outstanding

100

80

Price per share

$80

$30

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

1.b) What is Firm A’s new P/E ratio after merger?

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