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The following data concerning companies a and b are

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Reference no: EM13484630

The following data concerning companies A and B are presented:

Company A

Company b

Net income

$35,000

$50,000

Shares outstanding

5,000

10,000

Earnings per share

$7.00

$5.00

P/E ratio

10

14

Market price

$70

$70

Company B is the acquiring company, exchanging its shares on a one-for-one basis for company A's shares. The exchange ratio is based on the market prices of company A and company B stock.

(a) What will earnings per share be subsequent to the merger?

(b) What is the change in earnings per share for the stockholders of companies A and B?

Reference no: EM13484630

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