DEF stockholders are paid the current market value of their firm in the form of ABC stock. Both firms are 100% equity-financed. The total earnings of the combined firm are $77,000. What is the price/earnings ratio after the merger?
A) 8.15
B) 9.88
C) 10.41
D) 12.42
E) 13.37

Question

DEF stockholders are paid the current market value of their firm in the form of ABC stock. Both firms are 100% equity-financed. The total earnings of the combined firm are $77,000.  What is the price/earnings ratio after the merger?
A) 8.15 
B) 9.88 
C) 10.41 
D) 12.42 
E) 13.37

Quizplus · Accepted Answer

The Answer of DEF stockholders are paid the current market value of their firm in the form of ABC stock. Both firms are 100% equity-financed. The total earnings of the combined firm are $77,000.  What is the price/earnings ratio after the merger?
A) 8.15 
B) 9.88 
C) 10.41 
D) 12.42 
E) 13.37

DEF Stockholders Are Paid the Current Market Value of Their