Solution-Firm a is acquiring firm b by exchanging 100 of

Firm a is acquiring firm b by exchanging 100 of its shares

Reference no: EM13571673

Consider the following information for two all equity firms, A and B:

	Firm A	Firm B
Total earnings	$3,000	$1,100
Shares outstanding	600	400
Price per share	$ 70	$ 15

Firm A is acquiring Firm B by exchanging 100 of its shares for all the shares in B. What is the cost of the merger if the merged firm is worth $63,000? What will happen to Firm A's EPS? Its PE ratio?

Reference no: EM13571673

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Firm a is acquiring firm b by exchanging 100 of its shares

Reference no: EM13571673

Reference no: EM13571673

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Effect of financial leverage

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