Company A now acquires B by offering one (new) share of A for every two shares of B (that is,after the merger, there are 2500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

Company A now acquires B by offering one (new) share of A for every tw

1.	Company A now acquires B by offering one (new) share of A for every two shares of B (that is,after the merger, there are 2500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?
A.	7.5
B.	8.3
C.	10.0
D.	5.0
Answer» C. 10.0

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Company A now acquires B by offering one (new) share of A for every two shares of B (that is,after the merger, there are 2500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

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