Consider the following information for two all equity firms, A and B:
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Firm A
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Firm B
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Total earnings
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$3,000
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$1,100
|
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Shares outstanding
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600
|
400
|
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Price per share
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$ 70
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$ 15
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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?