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ABBA                              NABA              &nb

ABBA                              NABA                    ABBA

Before Merger                Before Merger               After Merger

EPS                                  $    3.00                                $       5.00

Price Per Share                       30.00                                        20.00

Price Earnings (P/E)               11.50                                       8.00

No of Shares                          30,000                                        15,000

Total Outstanding                                                                                          

Earnings                                $80,000                                     $40,000                        

Total Value                               __                                        ___

Use this information to answer the following questions

What is the P/E ratio?

A.

0.10
B.

10.00
C.

  20.00
D.

30.00
E.

none
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Answer #1

Answer.B 10.00

Post merger P/E Ratio = Current share price / Increment in EPS

= $ 20 / $ (5-3)

= $ 20 / $ 2

= 10.00

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